Hello, dear readers! Are you drowning in debt and not sure where to start swimming? I get it; it’s like juggling flaming torches while hopping on one leg and reciting the alphabet backwards. A dazzling act of balance, if you get it right—but boy, do you feel the heat if you mess up.
Don’t fret. You’re not alone, especially in a challenging economic landscape like South Africa. Many people are in the same boat, rowing to the tune of monthly instalments, and dodging the treacherous waves of interest rates. But there’s hope. Today, we’re going to look at how to prioritise your payments to make your life a wee bit easier.
The Four Horsemen of the Debt Apocalypse
Before we get into the nitty-gritty, let’s identify the ‘Four Horsemen’ that are usually the big players in the world of debt:
- Mortgage/Rent: Your home is your castle—or flat, or bungalow, or whatever it is you live in. The point is, you need a roof over your head.
- Utilities: Lights, water, electricity—these are non-negotiables unless you fancy bathing in a river and reading by candlelight.
- Transport: Whether it’s car instalments or the costs for public transport, getting to and from work is pretty crucial.
- Credit Cards and Loans: The seemingly never-ending vortex that keeps swallowing your hard-earned money.
Prioritise, Not Sacrifice
A popular approach to prioritising payments is the ‘waterfall method’:
1. Food and Medicine
You need to eat, and you need to be healthy. As much as you may worry about debt, these come first. Always.
2. Housing
Remember that castle we were talking about? Keep it. Falling behind on mortgage payments or rent is a slippery slope you don’t want to go down.
3. Utilities
Living in darkness is not the aim of the game here. Keep your electricity and water flowing by paying these bills on time.
4. Transport
You’ve got places to go, people to see, jobs to do! Keep your means of transportation intact so that you can continue earning a living.
5. Secured Debts
These are loans tied to an asset like your car. If you don’t pay up, you risk losing the asset, and that’s not what you want.
6. Unsecured Debts
Think credit cards, personal loans, and other debts that aren’t tied to a specific asset. These can wait if you absolutely have to make a choice.
Juggling Act
If you’re neck-deep in multiple debts, consider consolidating them into a single, lower-interest loan. This could make your financial obligations easier to manage. But a word to the wise: consult a financial advisor for tailored advice.
The Big No-No’s
- Ignoring The Problem: Hoping that ignoring a debt will make it disappear is like believing that the Tooth Fairy will settle your credit card bill. Not going to happen.
- Sacrificing Essentials: Your well-being comes first. Don’t go living off noodles and tap water just to get a few extra Rand to throw at your debts.
- Relying on New Credit: Tempting as it may be, using one credit card to pay off another is akin to using petrol to put out a fire. It’ll only make things worse.
Closing Thoughts
Debt is a maze, but it’s not an impossible one to navigate. Prioritising payments allows you to keep the ship afloat while you map out a long-term strategy. So, grab your compass, brave financial adventurer, and let’s find our way out together!
Cheers to a debt-free future
