Five ways to get out of debt now

This week the Department of Energy announced that petrol will increase by 52 cents a litre and diesel by 76 cents a litre on June 1. This is over and above rising electricity tariffs and food inflation.

Wherever we look, costs are going up and debt is becoming more expensive. To free up some disposable income it is important to get rid of debt obligations. This is easier said than done but Old Mutual’s head of financial education, John Manyike, believes it can be done.

Here he outlines five ways to cut back on your debt:

1. Tally your debt and make a conscious decision to pay off the most expensive debt first.  This is not necessarily the largest amount outstanding but rather the account that charges the highest interest rate. These are typically high interest bearing credit cards, store cards, overdraft facilities and personal loans.
2. Avoid accumulating more debt by paying for your purchases with a debit card or cash, rather than a credit card.
3. If you receive an annual bonus or any other unexpected cash windfall, contribute part of this towards reducing your home loan or car finance, as this will reduce the amount of interest you pay overall on these longer-term loans.
4. Set aside a portion of your bonus for investing over the long-term, like a tax-free savings plan, a tax deductible retirement annuity or an endowment fund.
5. List your unavoidable commitments for the rest of the year: school fees, medical bills, inflation adjusted insurance premiums, vehicle services – and ensure you set aside enough to handle those expenses without financial pain.

Handy tip: If you are struggling with your debt repayments and cannot see a way out, contact a debt counsellor through Justmoney here.