How do you do it?

How do you stick to your budget and get rid of debt?  In South Africa we do not have coupons to help nor do we have negotiable interest rates on credit card debt. So what can you do?

Home loans and vehicle finance can apparently be negotiated to a certain extent.  The rate would depend on your credit rating; you have nothing to lose by asking.

Start simply by setting reasonable, attainable and motivational goals for yourself.  

You cannot expect to pay off a R20 000 credit card debt in a month, or even 3 months. If you had that kind of cash lying about, chances are you wouldn’t be interested in reading this blog.

What is a reasonable goal? Once you have done your budget audit and you know exactly where your money goes  each month, you can then decide how much extra to put into either your smallest debt, or the debt with the largest interest. A credit card debt of R20 000 with 17% interest per year will take you approximately 2 years to pay off, if you cut up that card now and don’t touch it again.

A 6 month plan store card with R10 000 debt will take 6 months at R1,666, if you don’t use it again, which, when it is paid off will give you a minimum of  an extra R1000 to pay into the next debt. This is called the snowball effect.

One of the reasons given for paying off the lowest debt first, rather than the one with the highest interest, is because these are able to be paid off quickly and it motivates you to keep going. This doesn’t mean that you don’t keep servicing your other debts. Remember that overdue payments will have interest charged.

If adding just R5 a month to a debt will shorten the time it takes to pay it off, imagine what R100 a month will do!

Change your spending habits, stop making the banks richer and put away your credit card for a true emergency. Pay cash or use a debit card for all purchases. This way you only spend money you actually have!

Accountability! You and your partner should be accountable to each other for the money you spend, even if you have separate accounts. The partner can even be a friend with whom you are comfortable discussing your finances. Once a month hold a budget meeting and discuss what  you did with the money. Once you have to explain to someone else where the money went you are more likely to think before you spend. Guilt is a great motivator; ask any Jewish mom, we are experts at guilt!

Last but probably the most important, your motivation.  It could be anything, from wanting new clothes, a new car, even a new house. Maybe you just want to make ends meet each month, or to fix the roof that leaks, or the window that’s been broken for a while.

My motivation is the fact that we have had to deny our son the opportunity to study in Israel for a year. What is yours?