South Africans were the biggest borrowers in the world in 2014. That’s according to a report issued by the World Bank.
Debt Rescue also reports that citizens use more than half of their salary to pay off debts.
“More than half of consumers have to use 75% of their salary to make debt repayment,” Debt Rescue’s chairperson, Neil Roets, told IOL.
This is worrying. But although many people want to get out of debt, they don’t know how to.
The first step is realising the need to be debt free. Once that is established, there are other steps that you can take to get yourself out of debt.
Below is advice from different experts:
Pay off the most expensive debt first
Interest rates on debts are not the same. Consider which debt costs you more and pay it off first. This is advice from John Manyike, Head of Financial Education at Old Mutual.
“Review your debts and make a conscious decision to pay off the most expensive debt first. This is not necessarily the largest amount outstanding but rather the accounts that charge the highest interest rates, such as high interest-bearing credit cards and store cards,” Manyike was quoted as saying on Old Mutual’s website.
Use your bonus money to pay off debts
Many people use their bonus money to buy something they have been dying to have, but Manyike advises to use the bonus money to pay off debts, instead of spending.
Budget wisely and stick to the budget
Head of FNB Consumer Education, Eunice Sibiya, advices to ‘stick to your budget and remain financially disciplined’.
Cut down on nonessential items
Sibiya adds: “Cut down on nonessential items and pay a little more on your debts. Not only will this cut down the interest charged, but it will also help you pay your debt off quicker.”
See more tips from financial expert Dave Ramsey on how he managed to get out of debt
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