Unpacking the four-letter word: debt

Duann Cronje | 11 August 2023

Duann Cronje is financial planner at Fiscal Private Client Services who has a B.Com in Financial Management degree, a Postgraduate diploma in Financial Planning and holds the Certified Financial Planner accreditation.

A recent survey of South Africans by DebtBusters revealed that 52% of South Africans are stressed and anxious about running out of money before the end of each month.

The debt counsellor’s Money Stress Tracker also revealed that 36% of the consumers it surveyed are struggling to pay off debt each month.

Debt can, in some instances, be good or necessary, but it also has the ability to bring consumers to their knees.

The best way to avoid bad debt

Be clear on what your income and expenses are. Plan for expenses that cannot be paid from your regular income and set cash aside for these expenses.

Avoid impulsive expenses, specifically if you are using debt to finance these purchases.

How to get out of debt

If you have multiple debts, there are several ways to approach paying them off, but I recommend starting with the smallest amount of debt first. As soon as you have paid this off, increase the amount you pay to your second smallest debt by the amount you were paying off on the smallest debt.  

Once the second debt is paid off, increase the repayments to the third largest by the amounts you were paying to the first and second smallest debts. Read more: How can I pay off my debt faster? and watch Watch: Two ways to pay off your debt.

Continue to apply this principle. You might not be optimising your repayments by paying off the highest interest-bearing debt first, but seeing progress in paying off debt has a big impact on how debt weighs on us.

The assumption here is that your income stays the same and you have not been taking on more than one job to get yourself out of a difficult situation.

Top five tips to reduce your lifestyle expenses:

  1. Budget – you must know exactly what you earn and what you spend your money on. Read more: How can I draw up a budget that works for me?

  2. Optimise – always be aware of what you are paying versus what is available in the market. If there is a chance to pay less for the same service/product, you should investigate it.

  3. Prioritise – decide which expenses are more important than others and prioritise those expenses. As an example, it is easier to say no to that takeaway if you know you must save towards paying school fees.

  4. Discipline – stick to your planned budget and avoid emotions when you spend. Ill-discipline leads many people into debt.

  5. Stay present – be aware of where you are financially in your life and avoid the desire to keep up with the Joneses.


Paying debt versus saving

As a financial adviser, I am often asked if extra money should go toward servicing debt or into savings. It makes more sense to pay off debt first. If you have savings and debt, you are essentially paying interest on your debt to be able to say that you have a savings account.

If you are feeling weighed down by debt, remember that you are in charge of your situation and only you can work yourself out of your debt. It might take a couple of tough months or years, but the reward is worth it.