The COVID-19 pandemic, combined with a global recession, means that we are currently experiencing the ‘largest one-year debt surge since World War II’. As a result, studies suggest that almost 8 in 10 adults are experiencing some form of debt. While this means you aren’t alone when dealing with money troubles, it’s important that you work towards eradicating your debt sooner rather than later. In fact, this is one of the key financial considerations you should be making in 2022.
With that in mind, here are some top tips that you can use to get started!
- Diversify your income. One way in which you can begin to get out of debt is by increasing your income – and while this can be achieved by negotiating your salary, you may also want to consider a side-hustle. Not only will this diversify your income, but it’s also a chance to expand upon your interests and could even be the beginnings of your own full-time business in the future. After all, if you have the chance to turn your passion into a profit, why would you not make the most of that?
- Consider all of your repayment options. Whether you are dealing with student debt or housing debt, you must know what repayment options are available to you so that you can find a plan that best matches your current situation. For example, while you may be keen to get rid of the debt as soon as possible, larger repayments are not always feasible. If you live in South Africa, you may be able to use Debt Review plans to support you during this time (a process where all of your debts are consolidated into one large repayment plan), and you can read the pros and cons of debt review here.
- Incorporate repayment into your budget. Good money management is essential when it comes to repaying debts and providing yourself with a brighter financial future. This is particularly true when it comes to budgeting – as you can incorporate repayments into your budget. This means that you won’t be scrambling to find the funds whenever the repayment time rolls around, as you’ll already have them set aside for use.
- Be spending-savvy. While you should not deprive yourself of the occasional treat, being spending-savvy is a great way to get out of debt sooner, as you are no longer wasting money on unnecessary purchases. As a result, you should ensure that you use your wealth wisely and only buy things you genuinely need or want. You should also ensure you do plenty of research before making a big purchase so that you know you are getting the best price and value for money.
- Don’t entirely neglect your savings. Building up your savings may not seem like a priority when you have debts to repay, but it’s important that you work on both of these tasks at the same time. After all, your savings will be your lifeline if you land yourself in a difficult financial situation, and not having them to rely on could land you in even more debt than you started with. Ideally, you should set aside a small amount of money each month or week and place this into a savings account (be sure it has a reasonable interest rate).
- Stay focused. Sometimes it can feel as though you are drowning in your debts and that there is no clear end in sight. When this happens, it’s all too easy for you to feel as though you should give up with repayments as the debt will follow you wherever you will go – however, this is simply not the case. Staying focused and keeping up to date with your repayments will reap positive results sooner rather than later. When times are tough, remember what you are working towards.
- Work with a financial adviser. Despite popular belief, you don’t need to make all of your financial decisions alone. While hiring a financial advisor is an additional expense, sometimes having an extra pair of eyes on your finances can stop you from repeating any mistakes. They can also help you put practical plans in place to improve your financial health, especially when it comes to managing (and repaying) debts. For example, they may be able to help you to cut down on your spending.
In short, there are various steps you can take to get out of debt, even when dealing with the financial complications of the pandemic. You must simply remain focused on your end goal.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)