Curb that urge to spend, spend, spend
Most of us have discovered that to live entirely debt-free is almost impossible in our modern world. Overdraft facilities and retail accounts can be extremely useful, making life easier when cash is short.
The danger is in seeing credit as a free-for-all. Credit gives licence to a most basic human urge - the urge to buy and own things.
This urge if unchecked, can grow out of all proportion. Buying things that we do not need can become a way of life. This is fine if we have unlimited money. But if money is limited, we have to prioritise. Many people never learn to prioritise and, as a result, find themselves in quite a mess.
Prioritise: Pay for your essentials first
Bond repayments, school fees, rent, car repayments, and food are essentials. If these are not paid, the consequences are serious.
These are often neglected because uncontrolled spending on credit has swallowed half our salary.
If you are spending so much on paying off clothing and appliance accounts that you cannot afford essentials and have to resort to your credit card to pay for groceries, you are getting into deeper trouble with every passing month.
Take control of your debt
- Reduce the amount of debt you are in. An acceptable level of debt is if you can pay the full instalment every month, without defaulting on other obligations. Remember, always pay off the debt with the highest interest rate first!
- If you pay less than the full monthly instalment, you incur interest. This makes the following month's instalment higher - making it even less likely that you can afford the full instalment. In this way, a vicious cycle begins.
- Do not be tempted by the promises of debt mediators. They may fail to distribute your money to creditors, causing you further financial difficulties. And remember, it is illegal for them to charge you an upfront fee.