When facing the current financial situation, the ravages to the economy of Covid-19, and your own debt issues – reducing your debt is hardly the advice you want to hear just at this time. But possibly this is exactly the right time to take a long hard look at your situation and give some thought to practical ideas to sort matters into a more manageable profile. This is a most crucial and sensitive time – the time not to become trapped in a debt spiral.

Be aware of how much you are spending

Keep track of what you are spending – a notebook or suchlike. Sometimes there are small amounts going out of your budget every day and you may not be aware how that money is adding up. It may seem insignificant, but even small amounts should be noted and included to give you real perspective on what you are spending. Capturing the small expenses requires sharp focus and honesty.

Set up a budget plan

If you are stringently tracking your spending, the need to set up a budget becomes clearer. This is important in good times, but during tough times it is more than essential. Not only do you need to keep your spending in line with your income, but you also need to carefully consider those items you don’t need. Learn to reduce your lifestyle so that your budget can be more manageable. High priority expenses are always there, namely: bond repayments, rent, medical aid, insurances, etc. Groceries are important of course – you have to eat, but many other expenses can be curtailed or managed very closely, such as clothing and entertainment. Debt repayment becomes critical during this time, and is the last thing you should fall behind on, because failing to pay your debts carries legal implications, affects your credit rating, and will impact you negatively in the long term.

Reducing or removing debt

The problem with debt during difficult times is that people tend to think of more pressing issues such as health care and food. However, the cost of not paying your debt just rises and rises. You can perhaps arrange to change your medical aid premiums, or shop more prudently, but deliberately avoiding debt reduction places long term risk on your future financial wellbeing.

Deal with debt first – and quickly

You need to pay off the debt with the highest interest rate first. Some people advocate getting rid of the smaller debts first, and then tackling the bigger debts – but check to see where you will score the best returns for yourself and what makes you feel the most comfortable. You may be able to renegotiate your bond or car repayments, but get rid of credit card debts, store accounts, and bank loans as much and as fast as possible. Your creditors may be willing to accept smaller repayments over a longer period of time, bringing down your monthly expenses. For instances, you could take a ‘payment holiday’ by making a special arrangement with the bank with regard to your bond; reduced payments over a longer period could be useful while you straighten out and eliminate the high interest debts.

Cut down on expenses

Maybe easier said than done, but you would be surprised what you can do without, especially if you are prepared to put a planned time outage on certain luxuries such as movies, DSTV, subscriptions, eating out more than once a month, etc.

Finding extra cash

Clearing out your house and finding things you might be able to sell is a really good way of finding that extra money. Clothing, electronics, even old jewellery. Once lockdown is over, you may have a valuable source of extra income to really kick back on your debt.

The power of savings at this time

Funny how reluctant people are to use their savings to sort out debt. After all, that’s what it is ultimately for – a rainy day. Clearing yourself of debt is more valuable than small percentage interest raised on a savings account – debt compounds and grows more quickly than money in a savings account or unit trust. A critical aspect of this choice however, is to resume saving as soon as your debt has been settled.


There is always the possibility you could sell your house and buy something smaller and more manageable, even if it means some discomfort for a couple of years. You could also sell your car and get something less expensive on petrol and maintenance.

Don’t hesitate to communicate your problems to people who can help

Your family should always be your first line of support. When you all pull together amazing changes can be achieved. If your wife and children know your situation and are asked to contribute with suggestions of how they can find ways to save on expenses, you’d be astonished at how inventive and supportive people can be. Valuable lessons may be learned by all! There is no shame in admitting a problem; facing up to reality and communicating honestly with your family is part of finding the solution.

Debt consolidation agencies are there to help

Don’t be afraid to consult with the professionals in sorting out debt problems. These agencies specialise in packaging your debt and dealing with your creditors. They will help you consolidate your debt into a single loan account – you will pay lower interest and less interest over the term of your loan. However, before you commit make sure to check they are reputable, and that you know and understand any fees that are charged.

Finally, get help with planning a long-term financial strategy

Once you have regained a sound or even improved financial footing, you need to look to the future. You need to prioritise savings again – the amounts you paid off on debts should now be paid into savings or investment plans. Saving for a better home, your children’s education, or retirement are vital issues to keep in mind once you are free of debt. Don’t squander your money at this point by falling back into bad ways. Goals, discipline and a sense of achievement must motivate a better way ahead.

LegalTrack – how we do things differently

At LegalTrack we work with real people with real problems and therefore we apply a highly considerate and respectful approach to debt collecting. We understand that we need to be firm, but we are also aware that to negotiate successfully with an individual who is already in a difficult financial position, we need the skilful combination of empathy and experience, backed by well-honed communication capabilities. Our modus operandi is simple, direct, efficient:

  • Our first contact is via an SMS.
  • This is followed by a phone call to begin the negotiations on how the debt will be paid.
  • All payment arrangements/negotiations are confirmed via letters, emails and text messages.
  • Our promise is to constantly keep contact with our debtors in terms of all arrangements.
  • Any legal action is considered the last option.

Please find out more at: www.legaltrack.co.za