Avoiding the pitfalls of debt is entirely possible; it only takes some budgetary adjustments and willpower. Although the South African economy does not always lend itself to large cash purchases, it is important to carefully consider a loan, credit card or store account application before signing the dotted line. There are some simple steps to follow, that will prevent over-indebtedness and debt review.
1. Budgeting is essential. Sitting down and working out exactly what your expenses and income is will help you determine exactly how much disposable income you have. It will also help you determine if you can really afford another monthly instalment.
2. Set aside money in a savings account as soon as your salary is paid. That way the money is never there to tempt you, and can slowly grow into a sizeable rainy day fund. When considering large purchases that would normally go on credit, use this money. It will make you think twice about unnecessary spending.
3. Leave your credit card at home, and never exceed more than 20% of the available credit when using it. A credit card should be viewed as an emergency measure. If you can’t afford something cash, you don’t need it yet.
4. Pay all your accounts such as rent, mortgage, car payments and utilities the moment you receive your salary. Do not ever consider skipping a payment, as this will reflect badly on a credit check.
The golden rule of debt prevention is cash. It is far better to save up for something and buy it cash, instead of buying it on credit. Put what you’d normally use an instalment toward your savings, and you’ll reap the rewards of debt free, and stress free life.
Article written by: Andrea van Tonder 02-2013