“I want to encourage my fellow South Africans to make their finances count. While we may not be able to control external economic factors or financial disruptions, how we proactively prepare for and handle unexpected challenges can directly or indirectly impact, not only our financial well-being but also, the financial decisions and journeys of future generations. According to the National Credit Regulator’s latest statistics and Credit Bureau Monitor (March 2024), the number of consumers with impaired records increased by 190,428 to 10.09 million, this was an increase of 1.92% quarter-on-quarter and 2.70% year-on-year. Reaching important financial goals, like managing your debt pile (while dealing with life’s ups and downs) is not easy but possible. I would suggest not taking on any extra debt but rather try one of two strategies to help build financial resilience throughout your journey: increase your income or reduce your current debt,” encourages Carla Oberholzer, communications specialist at CreditSmart Financial Services.
Firstly, if you want to give increasing your monthly earnings a try, here are a few suggestions to stir up some creativity and fiscal add-ons:
• Side-Hustle: Utilise skills others might find valuable, such as tutoring, freelance graphic design, dance lessons, or other services during your off-hours. And don’t forget to turn your hobbies into income streams. Whether it’s selling artwork, crafts, or other handmade products, your passion can become a profitable venture.
• Overtime: If your job pays for the extra hours you put in, take advantage of the opportunity to earn more (without neglecting your family responsibilities, of course).
• Sell Unused Items: Identify items in your home that are in good condition, but you no longer need. What about kitchen gadgets, furniture, garden or exercise equipment? Selling these can provide a nice cash boost.
• Asking Rent: Do you have a spare or separate room at home? And, what about an extra parking spot that you have available? Those income opportunities may be closer than you think.
But, if increasing your income isn’t feasible, why not consider a strategic method to help tackle your existing debt instead? Here are a few options to help you find a suitable method that can fit your lifestyle and needs:
1. The Snowflake Method
The snowflake method is like a snowstorm; each separate snowflake may seem insignificant, but together, they can create a powerful impact. The same goes for debt repayment(s) using this method. By putting any small savings or extra money – no matter how minor – towards your debt, you can gradually chip away at what you owe. Over time, these small, consistent payments will add up, helping you to reduce your debt steadily. This method is perfect if you prefer a flexible approach and find satisfaction in knowing that every little bit helps.
Taking Action: Whenever you save money, such as skipping a coffee or finding a savings deal on groceries, immediately put the amount toward your ‘lower-my-debt fund’. Over time, these small contributions can make a big difference.
2. The Snowball Method
If you thrive on ‘quick wins’, the snowball method might be your best bet. Start by listing your debts from smallest to largest. Focus on paying off the smallest debt first while making minimum payments on your other debts. Once the smallest debt is cleared, use the freed-up funds to tackle the next smallest debt, and so on. This method gives you momentum, creating a ‘snowball’ effect that grows as each debt is eliminated.
Taking Action: Begin by paying off your smallest debt, such as a store account. Once cleared, apply that same payment amount to your next smallest debt, building your momentum until all debts are gone.
3. The Avalanche Method
If you are driven by minimising long-term costs and competitively tackling challenges head-on, the avalanche method may be your ideal choice. Instead of focusing on the smallest debts, this strategy prioritises paying off debts with the highest interest rates first. By doing so, you minimise the total interest you pay over time, which can save you money in the long run. Once the highest-interest debt is paid off, you can move on to the next highest one, and continue this pattern until you are debt-free.
Taking Action: Identify your highest-interest debt, like a credit card balance. Allocate as much money as possible to pay it down quickly, then move on to the next highest-interest debt. This approach can help you save on interest and pay off your debts faster.
“Choosing financial strategies that resonate most with you is key to staying motivated throughout any chapter of your financial journey. Whether you choose to increase your income and add money to your emergency fund, or, instead, slash your debt to lower your total debt amount, the important part is to start and stay consistent in your habits and doings. Let’s make this time of year a turning point towards an inspiring financial future, not only for ourselves but also for those who look up to us,” encourages Oberholzer.
