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4 Ways To Recover From Too Much Debt, According To Experts

4 Ways To Recover From Too Much Debt, According To Experts

Posted In: Money Talk

Being overindebted can be an overwhelming and debilitating experience. If not managed properly, it can easily spiral out of control, but there are smart, proven ways to manage your debt and bring you back into sound financial health. Here’s how:

It’s important to maintain a prudent approach to money management to avoid the debt trap, and this includes resisting the temptation to take on more debt when you are already overburdened. As soon as you realise that you are unable to repay your debt, it’s advisable that you relook your expenses and trim out non-essential expenses to free up some money. 

Cutting down on luxury items may be difficult, but over the long-term, it will avail extra cash that can be directed towards debt.

Here are some of the steps that can be taken to recover from being over-indebted:

Don’t take on more debt: If you are struggling to meet your expenses due to debt levels do not borrow further to cover expenses. Now is the time to commit yourself to clearing your debt and make a new start towards financial freedom by having a budget and sticking to it, monitoring your spending habits and avoid debt unless you can afford it.

Change your habits: Some habits can be hard to break but when faced with heavy debt it’s crucial to make changes in the way you spend money. Start cutting down on nonessential expenses such as eating out, holiday trips and expensive clothes. As you cut down on unnecessary expenses you will free up some money that can go towards clearing debt.

Negotiate with lenders: Lenders are always willing to renegotiate repayments if you can prove you are over-indebted and are struggling to commit to your debt. However, if your lender agrees to a reduced repayment amount, it will extend the repayment period but this can help ease the pressure on you.

Make sacrifices: You may have to let go of certain items to free up some cash. For example, if you are spending a substantial portion of your income on car repayments consider downgrading your car to reduce instalment. The same principle can be applied to cell phone contracts. Another approach would be to spend less on entertainment and consider carpooling for travelling to and from work. We need to start being more prudent and disciplined about expenditure.  By making certain sacrifices we can improve our financial wellbeing.

Words: Dhashni Naidoo, Programme Manager: Consumer Education at FNB

Image: Pinterest

 

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