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Knowledge Hub

5 min read

Your 4-step plan for paying off debt

Finance & Money August 10, 2017 By Budget Insurance

You can ignore your bank’s messages, delete the e-bills or leave the warning letters unopened on your desk, but that isn’t going to get rid of your debt. You can’t wish it away, but you can get out of debt with a lot of determination and this simple 4-step debt repayment plan.

1. Own your debt

Find out how much debt you have. This might sound simple, but for many it’s a terrifying prospect. Phone each debtor and find out exactly what your monthly repayment for the next month will be and how much you still owe overall. Also contact a credit bureau like TransUnion for a credit report – you're entitled to a free report once a year. Make a list of all your debt from lowest to highest.

2. Draw up a monthly personal budget

Once you have this information, draw up a basic personal budget to work out how you're going to pay your debt back and over how much time. Track and analyse your spending habits to find ways to save money. Whether it’s cutting back on take-aways, reducing data usage or finding smart ways to bank, there are always areas where you can cut down and save, even if it’s just R300 per month.

3.Start with the smallest debt first

The best way to pay off debts is to identify your smallest debt first and pay it off as quickly as possible. It’s a great feeling when you pay something off, giving you a mental boost to prepare you for your bigger debts. It'll also free up money to put towards your next debt. Once the second debt is settled you have more money to pay off the next one and so on.  

4. Pay more than the minimum

Only paying the minimum amount each month isn’t going to get you very far. To pay off debt fast you need to bite the bullet and double it, if you can. Examine your household budget and see what you can cut down to pay more into your debt. If you make sacrifices to pay off debt, you’ll find the reward is truly worth the effort. Set up debit orders to ensure you are disciplined and stick to your debt repayment plan.

The information contained in this article is for informational purposes only and does not constitute professional advice.
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