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Debt Counsellor

6 Steps To Becoming Debt Free

In an age of instant gratification and readily available credit, consumers have the freedom to make decisions that satisfy their needs and wants. However, if not closely managed, these decisions can leave you stuck in a debt trap.

The current economic environment adds a layer of challenges as consumers grapple with the effects of loadshedding, a higher interest rate and another fuel price increase on the way next month. CEO of National Debt Advisors, Charnel Collins says, “During these tough economic times, debt continues to be a heavy burden to bear for many households who are struggling to make ends meet.”

According to global economic indicators tracking site, Trading Economics, the household debt-to-income ratio in SA is expected to reach 69% by 2024 which is way above what is deemed a ‘good’ score – 36%.

The constant battle to overcome debt often leaves little to no room for seeking financial freedom. Collins describes financial freedom as the ability to make life decisions without worrying about the financial consequences. “You are able to afford the kind of life that you and your family desire because you have enough savings, investments, and cash on hand – you’re financially prepared for whatever life throws at you,” she says.

With discipline, perseverance, and patience, she believes this freedom is attainable for many of us. “It is an inherently long-term financial goal that demands delayed gratification.” She suggests six tips to aid the journey to financial freedom:

  • Set financial goals: Identify your short-term and long-term financial goals. This will keep you on track and enthused in executing them.
  • Stay on a budget: Set up a spending plan that accounts for your earnings, expenditure, and savings. Wherever possible, stick to the budget and avoid unnecessary expenses.
  • Create an emergency fund: Set a fixed amount of your monthly income to create an emergency fund that can be used to cover unexpected costs.
  • Pay off debt: Avoid incurring debt, and if you do, pay it off as soon as you can to save money on interest.
  • Increase your income: Find ways to earn more money by exploring various secondary income options available or by finding a higher-paying job.
  • Keep track of your progress: Review your finances on a regular basis and track your progress toward your financial goals. Stay on track by adjusting your plan as needed.

Collins concludes that reaching financial success and stability must begin with an adjusted mindset. “Your money beliefs shape your money mindset, shifting that in favour of your future will assist you in achieving financial freedom.”