Are you drowning in debt?
Instead of ignoring the letters of demand, you must take action
WHETHER it’s a credit card, bond repayment or even simple store cards, more often than not people have some sort of debt. However, the problem is drowning in debt instead of managing it effectively. Move! speaks to two financial advisors, Lekgowa Letswara from FNB and Rene Maritz from Liberty, on ways to help you recover your financial freedom.
WHAT TO DO WHEN YOU OWE TOO MUCH
Rene says the road to financial freedom is a long one with no shortcuts.
You have to start by drawing up a well planned budget and eliminating all unessential expenses.
“Plan for the future and take control of your finances. We all need money to live, but taking control of your finances involves more than just asking for a raise. It involves making good decisions with the little you have, changing bad habits and living below your means. The ultimate plan is to stop living from pay cheque to pay cheque,” says Rene.
WHAT TO DO WHEN YOU CAN’T PAY YOUR DEBT
Ask yourself some important financial questions related to your needs: What kind of lifestyle are you leading? Can you afford the lifestyle? What are your future financial goals? And is your current lifestyle leading you closer to your goals or away from them?
“If you can answer these questions honestly and successfully, then you will know yourself better and you will be able to take the next step, which is your financial plan,” adds Lekgowa.
It is quite difficult to pay your debt on time when you no longer have a job or any income coming your way. But Rene says negotiating with your credit providers for an instalment holiday is one of the ways to help when you are in this predicament.
“Negotiate with your creditors to see if they are willing to give you an instalment holiday. An instalment holiday will give you one to four months relief from paying your debt instalments. Some companies will be willing to do that, as it will cost them more money to get third party debt collectors involved to get the outstanding amount from you,” says Rene.
“Alternatively, see if you can negotiate a longer term to pay off the debt. This will reduce your monthly instalments. The point to remember is to communicate with the creditors, and show them that you are willing to pay them and not running away from your responsibilities. They will be more willing to agree to new terms.”
HOW TO KEEP AFLOAT IN FUTURE
Being debt-free is a liberating feeling, but it has its downside. Don’t rush to clear your debts, make sure you keep a healthy debt.
Debt-free living might be an ideal way of life, there are costly consequences in future. A website called The Jenny Pincher states, “Typically, you have to use credit to build a solid credit history, which means carrying some sort of debt, even if only temporary, is essential. This might come as a shock, but a blank credit file can be costly when attempting to set up accounts with nonlenders. Landlords, cellphone companies, utility companies and some insurance companies will run a credit check before doing business with you; and unfortunately, no credit history can be just as bad as having bad credit record.”