Debt is rarely intentional. It’s usually seen as a stopgap until you can sort things out and get up to speed with your money management. In most people’s minds debt is temporary – to begin with. But there’s that subtle point at which it becomes a spiral, slowly spinning out to encompass more accounts and borrowed money that you hope will solve the matter. But with discipline and a sensible approach, and a bit of self-knowledge, there are several ways to ensure you don’t get snatched into that spiral.

Be wary of credit cards

If you have a tendency to spend easily and worry about consequences later, then a credit card is probably not for you. Of course, this is difficult in a world of plastic money, not to mention the ease of ‘tap and go’. Credit cards are also useful if you are buying expensive items, because obviously you can’t carry that much cash around. However, they require very mature operators.

Always try to keep money in your credit card, never go over your limit, and make sure your limit is affordable for repayment. Phone your bank and request a decrease in your credit limit – this will remind you to stay within the straight and narrow before you make purchases which your card says you can have, but your money is telling you that you can’t. If you can’t afford it with or without a credit card, don’t buy it.

Don’t be card crazy

The more cards you have, the more you will struggle to limit your purchases. Have one main card, and then a spare card with a useful balance in it. A spare card is valuable in case you lose the first one, or there is some technical hitch along the way. Being able to switch to payment with an alternative card is important – but the money in this second card is also there for emergencies when you perhaps outrun yourself. Its purpose is purely a safety net.

Multiple cards relating to multiple payments means that you will be paying extra on all your balances. It also means that you will lose track of your spending. Limiting the number of cards to one and an emergency spare makes the most sense, unless you have very particular reasons for holding more – as long as you handle your cards with responsibility. Making use of debit cards instead would be a better way to go.

Pay that credit card balance in full every month

This is vital to ensure you don’t slip into debt. Be rigid about making sure you start each month with a clean credit card statement. Life is always lurking out there, inviting you to buy more and have more fun. And that’s great, but before you take that card out, do a quick calculation of costs, and ensure that you are able to pay that debt down within a certain period of time – such as no more than 3 days.

Keep an emergency fund

You can do this in several ways. Have a separate saving account where you contribute a small amount each month. After a year or so, you might have a little nest-egg to fall back on if things go awry. It can be as much as 6 months of your salary saved for those ‘in-case’ events such as economic declines, loss of your job, or the need to replace an essential but costly item such as a car.

However, you can keep smaller amounts in a second credit card account, or in cash, perhaps up to around R2000. The trick here, is to remain disciplined and not reach for that money because you want something on a whim. It should only be there when real necessity arises, otherwise a steady balance must be kept for security.

The secret to budgeting

One of the most important ways to handle your cash, is to ensure you take care of your monthly needs first; get your commitments out of the way – and that includes your credit card repayments. With the money that’s left over, figure out a budget that will include both savings and having the things you want.

There’s a host of ways to cut down your monthly spending – and the best way is to write everything down, that way you will quickly see what is possible and what should be cut out or left for the following month. Budgeting soon indicates where you are overspending or wasting money. The trick is to avoid temptation, so don’t wander the malls or spend too much time browsing online. Make a clear list each month of what you need – and if there’s something in the kitty leftover for extras, then – and only then – treat yourself.

Think of your budget as the rule book to your game plan. The two greatest debts – and preferably the only debts – should be your house bond and your car. Beyond those two necessities, the choice is yours. Knowing what you have, what you owe, and what you want, will help you establish a game plan to reach your goals without falling into the debt trap.

Tips to take home

  • Always pay regularly, and pay on time. Build a reputation for honesty and reliability.
  • Start saving young and build it into your life as a culture. The sooner you start, the more rewards you will reap.
  • Insure your life when you can – both for a financial nest-egg, and to ensure that if you die, you are not leaving someone else to pay your bills.
  • Don’t overload yourself with policies; no more than 3 should be effective in your life. Too many and you might find yourself borrowing money to survive each month. And that leads to another debt.
  • Pay cash, whenever you can. That helps you to plan a purchase and ensures you have the money set aside to do so.

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.

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