Why Avoiding Debt Is The Best Approach To Personal Finance
As households continue to spend despite uncertain economic conditions, many consumers are finding themselves carrying a significant debt burden.
Earlier this year it was revealed that 6000 South Africans apply for debt counselling every month and this figure may be set to rise as the cost of living increases while consumers ignore the warning signs and continue to rack up debts. At this time half of all households have an impaired Credit Rating.
If you're currently in debt, or are concerned about the number of accounts which arrive each month and your ability to pay them all, there may still be time to turn your fortunes around and live debt-free. The consequences of bad debts - including blacklisting and the repossession of your belongings - are not pleasant and can be easily avoided by avoiding debt itself.
Avoiding Debt - Where to Begin
For most people earning a salary, avoiding debt involves balancing a monthly budget. Self-employed people and business owners need to be especially careful about expenses because their incomes fluctuate from month to month. Whether you work for yourself or someone else, your monthly expenses should not exceed your income - in fact, there should be surplus left over each month for you to invest.
Many people land up in debt without realising it, because they have made purchases which they thought were necessary - or were they? Certain basic expenses such as rent or bond payments, car payments, insurance, petrol, and other fixed monthly payments have to be made and are not negotiable. For this reason, it's important to choose the price of your car and home wisely before you purchase - this will ensure that your monthly payments don't cripple you financially.
Once you've covered your basic fixed expenses, turn your attention to the purchases you make which tend to cost more or less, depending on what you buy. Choosing grocery items which are on special each week and adjusting your meal planning accordingly is one way of saving on expenses, while cutting back on a daily stop at the coffee shop or reading the news online instead of a newspaper each day are just two examples of small purchases which add up - you could save thousands of Rand each month by doing this.
By keeping your expenses low and living debt-free, you'll soon be in a position where your money works for you - not the other way round
About the Author
Nico Kleynhans CFP® is able to make the principles of Financial Management easy to understand. By means of games, books and seminars, clients learn how to apply these principles in their lives.
Nico is the author of SENSIBLE FINANCIAL PLANNING SERIES of books. The first title in the series is 'HOW TO IMPLEMENT DEBT MANAGEMENT THAT WORKS'. The Kindle release date is 7th January 2013
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