Getting out of debt

Martin asks: I am 34 years old, but I can’t manage my salary very well. As a result I am currently in serious financial difficulty that all my accounts are overdue ranging from motor, house, clothes. I also have to support family like my mother, sisters and brothers. What is the best model to use in order for me to ensure a better future for my children and family?

Maya replies: One of the biggest financial issues I come across, especially in the African culture, is the support of extended family. No doubt you are seen as the successful one in your family, you have had opportunities and now your family look to you to support them.

You do not want to let them down and it is also hard to admit to them that you are struggling to make ends meet. To them it probably seems that you have an inexhaustible supply of money.

However you need to make a very serious decision to get your finances in order because you will be of no use to anyone if you find yourself with legal action against you.

You will not be able to access credit in future and it will limit your job opportunities as many employers check credit records before employing a person.

Start with a budget
A starting point is to write down a proper household budget. What is the absolute minimum you need to survive? This will include your mortgage, utility bills (rates, electricity, water), groceries, petrol, insurance payments, debt repayments (car, store cards, credit cards). If you have a wife and children they need to be part of this process.

Stick to it
Commit to living on this austere budget for the next 12 months. Do not use your credit card or store cards and live only on your salary. If three days before pay day you only have baked beans in the fridge, enjoy them with a slice of toast!

Pay off smallest debt first
If you have some additional money left over, use this to pay off your smallest debt first — this will probably be your store cards. Once those are paid off use the money you were paying to the cards to pay into your next biggest debt and so on. The key here is not to take on any more debt once the debt is paid off.

Speak to your bank
It is also a good idea to speak to your bank. Most banks have a debt assistance division which can also help you assess your budget.

If you approach your bank before you get into serious difficulty they will be willing to adjust your repayments by extending the period of your loan to provide you with some relief. It is best if you try and work out your finances first rather than going into formal debt review as this should really be a last resort if you are really unable to meet your obligations.

Play open cards
Once you have all this in place and fully understand your financial situation, you need to sit down with your extended family (mother and siblings) and you need to play open cards.

Explain that you are in financial difficulty and that if you don’t take control now you will not be in a position to provide for them in the future. They may need some kind of financial support but you now but look at how that fits into your budget and be realistic as to how much you can support them right now. Hopefully once you are out of difficulty you can assist them more, but right now you are in crisis and everyone needs to tighten their belts.

It takes discipline
The bottom line is that to get out of financial difficulty requires will-power and discipline. It is something you have to commit to.

Give yourself a set time period and a goal that will keep you focused.

Keep a monthly household budget and share that with your immediate family so you understand where your money is going.

Another good idea is to draw cash each week to pay for day-to-day expenses based on your budget and put it in an envelope. You know that when that envelope is empty, there is no more cash. It helps you to be aware of what you are spending.

Good luck and think of this as a very positive learning lesson. You will find that you will actually enjoy the challenge of working towards a goal and finally taking control of your life.

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