When the dust settles on the Festive Season, a stark reality is left in its place: millions of South Africans have enjoyed an expensive Christmas that they can’t afford. According to recent statistics, 22 million South Africans are living off money borrowed from the bank and about half of these people are over three months behind on their repayments. That’s a staggering statistic.
But according to Glen Jordan, Director of agile Fintech firm IMB, January is not all doom and gloom. “A new year gives rise to a renewed sense of urgency. For people in debt, they should make going debt-free their number one resolution for 2016.
Here are five steps to make that happen in the New Year:
1. Don’t be afraid to ask for help
“I say this all time: the first step to overcoming the problem is acknowledging you have an issue in the first place,” says Jordan. Mind-set, it seems, is everything. “Once you’ve acknowledged your issue, act fast.”
Unfortunately, in Jordan’s experience, a lot of people are too proud to admit they’re in over their heads. “Men are serial offenders. While their wives are happy to speak up, husbands are notoriously reticent to admit that they’re in debt.”
Overcoming that hurdle is the first step.
2. Curb your spending in January
The month of January is notoriously tricky as an early December paycheck means an extended wait for that next injection of money.
The solution, according to Jordan, is a simple one. “Curb your spending. Start cutting back on luxury goods and only spend what you can afford.” This is a simple piece of advice, and one of the 8 golden rules of managing your debt.
“It sounds simple – and it is! Yet it’s amazing how many people are unwilling to give up luxury items for a month and would rather take out a loan instead.”
3. Credit isn’t a final solution
The temptation in January is to turn to a loan for help, but in a struggling economy and an uncertain jobs market, is living on credit a sustainable solution?
“In South Africa, people think that to repay a debt, all they need to do is borrow more money,” says Jordan. “They fail to realize that living off credit isn’t a long term solution.”
Instead, credit is likely to further entrap you in the debt cycle. “Companies that lend money exist because they profit off people,” Jordan says. “Unfortunately, delayed or missing repayments can significantly increase the debt burden by invoking penalty clauses and new expenses such as legal fees. Avoid this as much as possible.”
4. Forget the stigma of debt
Jordan believes one of the reasons so many millions of South Africans are in debt is because of the perceived stigma around it – a stigma the IMB Director wants to change. “Many people think that being in debt makes them a failure in some way, but it’s simply not true. The price of living is going up while our economy is weakening, so it stands to reason people fall into financial arrears.”
5. Get behind entrepreneurship
Jordan is a firm believer in entrepreneurship. In an economy that is facing an uncertain future, it is “massively important,” he says for “people to start generating their own wealth. We desperately need forward-thinking entrepreneurs with big ideas and a hunger to make a life for themselves.”
And of course, the minute an entrepreneur begins generating their own wealth, their debt is resolved naturally.
“Some people are born with an entrepreneurial spirit, but other people can cultivate it. What’s important is that we empower people to start creating jobs for themselves.”
Glen is optimistic about the future, despite the hurdles that lie ahead. “Attitude is everything, and overcoming debt is a matter of realizing you need help and addressing the problem quickly.”