How to handle debt in 2015

The Christmas spending is over, and it is time to get (financially) serious again. Maybe you have school deposits that need to be paid, or rent that is due. Moneybags journalist, Ashleigh Brown, looks at ways that you can handle your debt this year.

A lot of people would have been paid a little earlier in December last year, and started spending a lot earlier too. But now that the New Year has rolled around (and salaries are only due by the end of the month) many might not be coping because they overdid during the festive season.

“Too many South Africans live on credit, spending more than they earn. Unfortunately this lifestyle is unsustainable, sooner or later this habit catches up with us and it becomes incredibly difficult to correct. Why not start the New Year off with a new mind-set and a rule of thumb: don’t spend money you don’t have,” says Sugendhree Reddy, head of personal banking at Standard Bank.

Quick fix solution

“Many people think that borrowing money to help them get through the first few months of the year will be a quick fix solution, however, taking out a loan or using credit cards to help cover short-term expenses can escalate into a big financial problem and may even result in being blacklisted if not managed properly,” says Eunice Sibiya, head of First National Bank (FNB) Consumer Education.

Sibiya explained that if you have R10, 000 on a store card and the interest is 22% annually, you will be paying off R183 a month. If you pay that amount or close to it back you will not make a dent on the actual loan.

“This money could rather have been used to save for your children’s education, to pay off your home loan quicker, or even treat yourself to something that month,” says Sibiya.

An additional problem is that people stop paying for policies and long-term investments in order to service their debt, which then impacts their financial future.


The first step to handling your debt is to create a budget. Budgeting will help you realise your financial status, as you can work out how much you are left with after all the fixed monthly instalments are paid.

“Write down every expense for the month, including groceries, clothing, electricity, airtime, entertainment, rent or bond and credit card repayments. Once this has been done you will quickly see that there is space to cut down on spending and clear your debt,” says Sibiya.

It is important to prioritise the expenses while drawing up your budget as well as, says Reddy:

  • Sticking to the budget once it has been drawn up. This will help control how much you spend, so that you have more money to put towards paying off your debts.
  • Deciding on how much money you can afford to put away in a savings account every month to cover unexpected events. Savings are important as they help with unexpected financial emergencies or other things you love to do.
  • Allocating a percentage of your income that you can afford to spend on paying off loans to decrease the amount owed.

Paying debt off

Once you have a budget  you can begin to free yourself from debt.

“Firstly, you need to stop increasing your debt, which allows you to focus on paying off your current commitments,” says Sibiya.

Pay off all your accounts and cards as early as possible. This will help you to enjoy a year in which there is money left at the end of the month, rather than the traditional ‘too much month left at the end of your money,’ explains Reddy.

“In paying off your debt, focus on reducing the largest amounts first. This saves the greatest amount of interest which, again, can be used to pay off other, smaller debts,” says Reddy.

Reddy went on to highlight that debts should be paid off according to the interest rates that are payable on them. It is best to pay off short-term debt first, as these attract higher interest rates.

Financial consultants

Trying to come up with a budget by yourself while juggling other commitments can be tricky. So remember that you don’t need to do it alone.

The beginning of the year is the best time to find a financial adviser to help you plan your money better.

“They will have the financial education, financial research tools and industry know-how to ensure that the various stages of your life are considered and financially catered for. They will also be able to identify short-, medium- and long-term investments,” says Reddy.

Reddy also advises you to speak to an expert if find yourself in the debt trap.

“Far too many consumers think that by ignoring bank correspondence over non-payment, or skipping payments will make the problem go away. It helps to talk to the organisations involved before it’s too late, as defaulting could result in legal action and a solution can always be made,” says Reddy.

“If you find yourself in a position of spiralling debt, visit your bank. Be honest about your financial position and there may well be a solution to help you,” says Reddy.

Sibiya agrees saying that if you find yourself with major financial problems this early in the year, make small changes to your budget , spend less on unnecessary items and if need be,  approach your bank  to speak to them on what plans you can put in place to pay off the debt.

If there’s one resolution you should make it should be to be financially savvy this year. Try and get all your debt cleared as early as you can, so that you have more money to save at the end of the month. Moneybags also has an article on how to save money on your grocery bill to help you out, click here.