If you’re permanently low on money, time and enthusiasm then you’re on the same page as most students today. While we can’t solve all your issues, we can offer some valuable advice on how to get out of debt.
It seems to be a vicious cycle, doesn’t it? You take out a loan for your studies, you move away from home and bunk up in student accommodation with your peers, perhaps you manage to get a part-time job to supplement your meagre income – yet you never seem to get ahead. Student debt can be crippling and dog us for years after we’re done with varsity.
However, there is a simple way to get out of debt. It may not be the immediate solution that you’re looking for, but it’s a solid plan.
Get Out of Debt One Month at a Time
The first thing we need to quantify before we can get out of debt is how much we have coming in versus how much we have going out. If your outgoings are far more than your income, then you’ve got a bigger problem and may need to explore your job options.
However, if you are breaking even or have a little over at the end of the month, then this will work well for you.
Firstly, make a note of all your debt, from store cards, credit cards, student loans – everything.
Make sure that you have the following information:
- Total outstanding amount
- Monthly interest
- Monthly instalments
Which of these is costing you the most in interest? That’s the one we’re going to target first!
Let’s assume that your spreadsheet looks a little like this:
|Total Outstanding||Interest||Monthly instalments|
|Store Card 1||R1500.00||23%||R200.00|
Of these amounts, the store card is attracting the highest interest rate, so the longer it remains active, the more you will be spending. Therefore, in the first couple of months, you want to work on paying this off with any additional money you have, perhaps even cutting back on entertainment for a short period to get the ball rolling.
Once you have paid off the store card, you will have R200 per month available. This additional R200 will go toward your credit card, which is the next most expensive loan. Therefore, you will be paying R300 + R200 into your card, but your monthly expenses will not have changed – after all, you didn’t have that R200 over last month, so that you won’t miss it.
Once your credit card is paid off, you will then take the R200 + R300 and add it to the R600 you’re paying into your student loan.
This snowball effect allows you to reduce your debt incrementally each month, while not impacting your actual monthly outgoings. Smart hey?
Obviously, in a perfect world, we would avoid getting into debt, but sadly, that’s not always an option. So, being careful with your money, and mindful of your spending, you can get out of debt sooner rather than later.