IF there is one New Year’s resolution you should keep, it’s taking control of your finances.
This is made even more important because many of us blow a fortune on our credit cards during the silly season, only to have to face up to heavy January expenses.
Jonathan de Beer, head of collections at FNB Credit Card, says that implementing a few basic strategies will help you see through the fog of your debt to the sunshine beyond.
“There are a few tricks to make your life easier; understand your debt, budget correctly and stick to the plan! Follow these simple rules and you’ll be one step closer to your financial freedom and a step closer to being debt free,” he says.
Know your debt
You need to understand the following about credit repayments:
- What type of agreement you have entered into and who you are repaying. Is it a credit card, a home loan or a store card, for example.
- How much you must repay and for how long
- How much interest you are paying
Always prioritise debt that costs you the most. This is not necessarily the debt with the highest rand value. The debt you must target first is the one with the highest interest rate or debt repayment fees.
Budget, budget, budget
Understand your income. Most people have a set amount that they receive every month in the form of a salary, wages or pension pay-out.
“Once all your expenses and debt repayments have been accounted for, if there is any surplus, consider putting this towards the debt that is attracting a high interest rate or has a shorter repayment term,” says de Beer.
The best way forward is then to take the amount you were paying towards that debt and use it to repay the next short term or most expensive debt.
“Once you settle this debt avoid unnecessarily taking on more debt,” warns de Beer.
Stick to the plan
“Customers looking to make a fresh start should remember that whatever option they choose, getting out of their debt is not a sprint but a marathon,” says de Beer.
The trick is, once you have cleared one debt don’t be tempted to take on more. Use the freed up cash to go towards the next debt repayment.
