How to NOT fall into the debt trap

In South Africa, a greater part of consumers turn to credit cards and loans for various reasons, and before they know it, they find themselves caught in the debt trap. The debt trap – in the simplest terms – is when the amount of money you owe to a creditor or multiple creditors spirals out of control as a result of you spending far more than you earn. There are many reasons an individual might find themself in debt, from unexpected expenses to job loss or simply bad decisions leading to reckless spending; there is no one path to becoming over-indebted.

The mental fortitude to make smart financial decisions is not something that comes naturally to most people. Most consumers will err on the side of irresponsible spending more often than not. The truth is that financial responsibility is a learned skill, one made more difficult for individuals who do not earn enough to allow making mistakes. Below, we have summed up easy ways for any consumer to employ to avoid falling into the debt trap.

• Assess Your Lifestyle – Take a hard look at your current situation and create a detailed budget of where your money is going. Document everything from rent/mortgage payments to groceries and even coffee trips – you’d be surprised by how quickly those cups add up. Analyse all spending and highlight any areas – big or small – where you can cut back.
• Be Clear on Your Needs – This means knowing where to cut back and where to focus your funds. Segregate your budget into essential and non-essential expenses and start trimming the financial fat from there, such as swapping that expensive gym membership for a free online workout tutorial. Being clear on your needs means making difficult choices and cutting out short term pleasures on the way to long-term rewards, but it does not mean cutting out simple pleasures altogether. The key is to find a healthy balance between what you need, what you want, and what you can realistically afford.
• Say No to New Debt – One of the most difficult parts of becoming financially savvy is forcing yourself to live within the new fiscal boundaries you’ve set for yourself. Many consumers make the mistake of creating more debt to alleviate the pressure of what they owe – avoid this at all costs as it will cause you to fall deeper into the debt trap.
• Always Pay on Time – Many companies apply late fees or higher interest rates to any payments made after the agreed-upon date resulting in you paying extra fees that are avoidable. If you can, schedule your payments to go off the very last day of the month or set reminders for yourself and ensure that all payments are made on time.
• Get Help – Knowing when to ask for help is a sign of strength and intelligence, and many consumers struggling to maintain their financial obligations turn to Debt Counsellors for assistance. At Debtco Group, our team of expert and professional Debt Counsellors can help you gain control of your debt by restructuring your payment agreements, protecting your assets, rebuilding your credit rating and eliminating your debt stress. You don’t have to struggle alone.

At Debtco Group, we pride ourselves on our ability to provide personalized and customized debt counselling treatment to our clients, ensuring that they and their assets are protected as they regain control of their finances. If you would like more information on how we can help you break out of the debt trap, please contact us for an assessment.