Three steps to getting debt behind you

Debt is so easy to get into and so very difficult to get out of. Prevention is always better than cure but the reality is that we get enticed into debt over time and soon find ourselves in it way too deep. The cost of debt climbs quickly and robs us of the potential to create wealth.

Institutions make their money by lending money to you at a rate over the time. You can benefit by reversing the formula. Interest + time = profit. You cannot reduce the interest rate but can reduce the time = less profit for institution.

Less interest for institution means more savings for you. More savings for you compounded over time = more wealth for you.

Here are 3 steps to getting ahead of your debt in 2016. A debt trap can be likened to trying to fill up a bath with the tap on but leaving the plug out.

Step one

Put the plug in by making a conscious decision to get out of debt. The culprits need to be identified and cannot be allowed to increase anymore. Credit cards, overdraft, personal loans, store accounts, outstanding taxes. All have to stop.

Step two

Open up the tap with your disposable income. This is the money that is left over after your cost of living during the month. You will have to draw up a budget on a sheet of paper detailing your expenses throughout the month. Focusing on living expenses, split them into ‘nice to haves’ and ‘must haves’. This is the hard work as you have to be brutally honest with yourself in identifying what you need and what you can do without.

Step three

Keep a close eye on the water level. Divert the new found savings back into paying off your debts. Targeting the highest interest bearing ones first and then working through the next. Patiently keeping your living expenses well under control. A new year brings on a wave of price hikes. So your cost of living will is going to increase anyway. Expect 2016 to be really tough. The cost of debt will probably increase as interest rates are on the rise. Debt is the enemy so you need will have to squeeze those living expenses even more now than ever before. Reducing debt saves you fortunes and only saving for yourself instead of paying the bank will put you on the road to financial freedom.

Weekend Breakfast's Sam and Africa had a conversation with Paul Roelofse. Listen below...


Recommended

by NEWSROOM AI
Read More
'The animation (The Grinch) is beautifully stylish and pretty' - Gayle Edmunds

'The animation (The Grinch) is beautifully stylish and pretty' - Gayle Edmunds

In the movie review, film critic Gayle Edmunds shares her views of Benedict Cumberbatch's performance is 'The Grinch' movie.

Film critic explains why everybody wants to see the film 'Bohemian Rhapsody'

Film critic explains why everybody wants to see the film 'Bohemian Rhapsody'

In the movie review, film critic Gayle Edmunds gives us the scoop about the 'Bohemian Rhapsody' movie.

People shouldn't be dying from HIV anymore says Dr Michelle Moorhouse (Wits RHI)

People shouldn't be dying from HIV anymore says Dr Michelle Moorhouse (Wits RHI)

Senior Programme Manager at the Wits Reproductive Health and HIV Institute, Dr Michelle Moorhouse spoke to #WeekendBreakfast host Africa Melane about World Aids Day, and how far we've come to combat the illness.

The SA directed movie 'Hunter Killer' was competently done says film critic

The SA directed movie 'Hunter Killer' was competently done says film critic

'You can sit for two hours to watch it but you're really going to have to switch your brain off because it doesn't have anything new to offer' - Gayle Edmunds, film critic

FIA World Rallycross Championship set to take center stage in the Mother City

FIA World Rallycross Championship set to take center stage in the Mother City

In the car feature, automotive journalist Jacob Moshokoa chats about the FIA World Rallycross Championship which is set to take place at Killarney, Cape Town.

The movie 'Widows' beautifully links the politics of crime - Gayle Edmunds

The movie 'Widows' beautifully links the politics of crime - Gayle Edmunds

In the movie review, film critic Gayle Edmunds shares her views of Steven McQueen's 2018 heist film 'Widows'.

Popular articles
Evidence shows how ANC’s Danny Msiza allegedly benefited from VBS looting

Evidence shows how ANC’s Danny Msiza allegedly benefited from VBS looting

Msiza has now resigned from his position as ANC Limpopo treasurer general.

[Watch the latest adverts] Do you agree? Chicken Licken is the boss of Nando’s!

[Watch the latest adverts] Do you agree? Chicken Licken is the boss of Nando’s!

Chicken Licken’s latest ad flame-grills the most recent one by Nando’s, says Nicholas Kühne of Wunderbrand.

10 most-read 'personal finance' articles of 2018

10 most-read 'personal finance' articles of 2018

Making ends meet, investments, property, debt, financial freedom… these were the very best "your money" articles of the year.

#CyrilOn702: 'I can assure your listeners that Thursday is confirmed'

#CyrilOn702: 'I can assure your listeners that Thursday is confirmed'

Head of Presidency Zizi Kodwa confirms Xolani Gwala's exclusive interview with President Cyril Ramaphosa will go ahead.

'I am not sure why I must vote for the DA yet again'

'I am not sure why I must vote for the DA yet again'

Caller Phillip on the Eusebius McKaiser Show says he is not sure whether he should vote DA as its policies are uninspiring.

Tons of coal exported from SA not Eskom grade says expert

Tons of coal exported from SA not Eskom grade says expert

While South Africans are sitting in the dark million tons of coal is shipped to other countries like China, Japan and India.

'Evidence is solid. Poor people’s money was used illegally. Shivambu benefitted'

'Evidence is solid. Poor people’s money was used illegally. Shivambu benefitted'

Ray White interviews Pauli van Wyk, an investigative journalist with Scorpio at Daily Maverick.