For many people, the reality of owing money is too much to face. Becoming debt-free the hard way is the best and only way to take control of their lives. James Williams, Head of Marketing at Wonga provides some top tips on tackling debt.
1. Budget and categorise your loans
When it comes to being debt-free, the first thing you need to do is draw up an effective budget that will help manage your cash flow. An important part of the budgeting process, particularly if you have taken out multiple loans and are still repaying them, is to categorise your debt. Categorising your debt is the process where you prioritise the repayment of your various loans by their interest rate.
2. Pay off your store cards
Many stores will encourage you to take out a store card, where you can purchase items on credit instead of paying cash. While this can be one way of managing your cash flow for something you might need, remember that store accounts can charge interest and management fees that will quickly add up should your accounts remain unpaid.
3. Pay yourself first
The concept of ‘Paying Yourself First’ doesn’t mean spending all your money as quickly as possible on feel-good items such as the latest clothing or trendy experiences; it means making forward-thinking payments to accounts that will either appreciate (that is, grow in value) over time, or will cost you less money going forward.
4. Re-evaluate your assets
Most of us feel trapped in the belief that we need to purchase our own home or car to ‘keep up with the Joneses.’ However, few people consider that both of these major purchases come with their own set of expenses that will steadily increase over time. Consider that when purchasing a car, handling repayments on any finance will only be part of your concern; you will also need to pay for fuel, wear and tear on your tyres, maintenance, and any parking fees.
5. Consider consolidating your loans
If you find that you either have too many loans that are difficult to repay or find yourself in steep debt as a result of falling into arrears or being behind on too many repayments, you can opt to enter into a loan consolidation with a debt counselling specialist. This is the process where you can bundle multiple loans together into one simple monthly repayment at a new interest rate.
For more information visit www.wonga.co.za
Article by Wonga Online