Personal Finance: 5 Ways South Africans can reduce personal debt

by CNBC Africa 0

By: Stephen G Davies 

If you’re struggling with your current level of personal debt, here are steps you can take to regain control of your finances and the situation…

The latest statistics about the level of South African consumer debt have been released by the National Treasury and they don’t make comfortable reading. The Local Government Revenue and Expenditure review, which also details the level of personal debt in South Africa, has revealed that consumer debt hit R128.3 billion on 31 March 2017. Of that, R86 billion is carried by households. With a range of price hikes and policy changes still due to be made this year, the National Debt Advisors are warning consumers who struggle with debt to tighten their wallets and control their spending if they want to make it through the year.

If you’re struggling with your current level of personal debt, there are steps you can take to regain control of your finances and the situation…

1. Take stock of all your debts

The first step is to write down every debt you owe. That includes car loans, personal loans, payday loans, credit cards any other short-term debt. You don’t need to include mortgages or student loans as these have longer terms and relatively low APRs. You should note down the balance (the amount owing), the interest rate, the monthly amount you pay for each of your debts and any other fees that apply. You should then be able to see clearly which debts are the most expensive to service. These should be the debts you repay first.

 2. Reduce your expenditure

We all have essential expenditure, such as rent, food, utility bills, transport costs and other household bills, and expenditure which is discretionary, such as holidays, non-essential clothing, takeaways, gym membership etc. By tightening your belt and being aware of where your money is going, it is possible to make simple savings every single day that can reduce your costs. Here are 40 money saving tips to consider.2

3. Increase your income

Unfortunately, that’s easier said than done. In South Africa, wages, in real terms, are currently falling. That means the money you earn is not going as far as it did at the same time last year due to the rising cost of inflation. If you have the option to work paid overtime then doing just a few extra hours a month could help you make a considerable dent in the capital amount you owe rather than simply paying off the interest incurred. If you can’t work overtime, are there other ways you could increase your income?

4. Seek advice from a debt counselling service

There are a number of personal debt charities in South Africa, such as the aforementioned National Debt Advisors, who you can contact for free debt advice. They will help you work out the best way to tackle your debt, establish a budget you can stick to and even negotiate with your creditors on your behalf to reduce your monthly outlay.

5. Transfer to a zero interest deal

If your debts are limited to a couple of credit card bills which are incurring interest, the cheapest and simplest option may be to transfer the balances to a zero interest deal. Although you will incur an initial transfer fee, the amount you will save by not paying interest for a period of up to 24 months will greatly outweigh this charge and will allow you to chip away at the capital amount rather than only repaying the interest.

What are your experiences of personal debt? Please share your thoughts with our readers in the comments section below.