by As the cost of living continues to soar, the biggest financial mistake you can make is failing to acknowledge that you might be at risk of becoming over-indebted, says the Association of Savings and Investments of South Africa (ASISA).
There are a few sure ways to get yourself back on track, however, according to ASISA.
Want to become debt-free? Apply for a free debt review here.
Here are three easy steps to ensure you are always debt-free
1) Take a reality check and draw up a budget
You need to look at your essential expenses versus your less essential expenses. Essential expenses, for example, include groceries, petrol to work, schooling, and rent or mortgage payments, while non-essential expenses include an extravagant car, expensive clothing, meals at restaurants, concert tickets, the list goes on.
Once you have determined these, you need to draw up a budget, and start the ball rolling to cut those unnecessary expenses by selling the items you do not need, downgrading your lifestyle and paying off those store accounts and credit cards as soon as possible.
2) Free yourself from debt
The Association also recommends debt consolidation as a freely available lifeline in the ocean of debt.
Debt consolidation agencies specialise in packaging your debt and dealing with your creditors. However, make sure the agency is reputable before you sign up. Also, consider the fees charged.
If you feel it does not make sense to consolidate your debt into one monthly installment, you may prefer to apply for debt review, to get advice and assistance on dealing with creditors.
3) Plan for the future
Real financial progress can only be made when you have not only cut all non-essential debt but have also budget for the future, as well as
The Vanguard Group explains that benefits of an emergency fund include keeping stress levels down by covering those unexpected bills, preventing spending on a whim and ultimately preventing bad financial decisions. But your savings shouldn’t stop at emergency funds; they need to extend to investments in education policies for your children, saving for your retirement as well as taking out competitively-priced short term risk cover.
It is natural to want a reward yourself after working hard to rid yourself of debt, but you must look ahead. Create a clear set of long-term goals such as saving for a home, a child’s education or your retirement.
Focusing on these goals will help to prevent you from wasteful spending and falling back into poor financial habits according to Peter Dempsey, Deputy CEO of ASISA.
Dempsey adds that most of us get into financial trouble at certain times in our lives and it is nothing to be ashamed of – we just need to ensure we take the steps towards financial empowerment as soon as possible.
