Deal with lockdown debt

Deal with lockdown debt

Lockdown regulations have left many South Africans in financial despair. It’s been tough. If you’ve got debt and feeling the pressure, you’re definitely not alone! Let’s explore how to deal with lockdown debt.

Be kind to yourself

Now is the time to be kind to yourself and to look after your mental health as well as your financial health. If it’s lockdown that has caused your financial problems, understand that circumstances are often beyond our control. Don’t put yourself down. It’s not your fault if you had to take a salary knock, or if your employer put you on short-shifts. This whole lockdown situation is absolutely out of your control and thus your current financial state is likely more the result of this.

Don’t pay the blame-game, rather accept the current situation and see what you can now do to improve it.

Assess your debt situation

Right now you need to get a full understanding of your debt situation as well as the priorities. So grab and pen and paper and start making a note of all your debts.

  • Credit cards
  • Store cards
  • Overdraft
  • Home loan
  • Car payments
  • Personal loans
  • etc

This may be a tricky excecisse as you need to know exactly how much you owe to each institution. Make a note of the current monthly instalments and whether you are overdue on payments (highlight these ones). Also write down the interest you are paying along with any additional fees.

This information will help you understand what your overall debt situation is.

Note: You may need to phone some of the institutions to get the info, do it! It is worth the effort.

Relook at your budget

If you don’t have a budget then it’s really recommended that you read the Budgeting 101 series. This contains videos and a workbook to help you get started with your own budget.

If however you already have a budget, it’s time to tweak it. Does it still reflect reality? Is the income stated on your budget what your earning? Do the expenses still make sense? And most importantly, can you cover all your expenses, including the debt repayments.

What if I can’t cover my expenses?

This is unfortunately where things get tricky. The reality for many South Africans is that they can’t actually cover their expenses due to circumstances bought about by lockdown.

If you are currently not earning enough to cover your expenses then you need to firstly cut-down as much as you can. This is easier said than done and there are limits as to what you can cut down on.

Debt is expensive and institutions sometimes take advantage of your emotional and financial turmoil. You should probably chat to a qualified financial planner who can look at your specific situation and advise on the way forward. You may need to take out debt, but, advice on products and debt consolidation may prove to be invaluable.

Make a plan of how to deal with lockdown debt

If you are able to cover your debt repayments and expenses then you are in a great position! This means that you could potentially cut down on some expenses in order to make additional debt payments. Here are some considerations when making a debt-payment plan.

  • Look for ways to repay any arrears you may have. The interest and late-payment fees will be expensive and make things unnecessarily hard. Tackle these overdue amounts first.
  • Ensure that you can keep up with all your debt repayments. This may mean cutting out any luxuries for a month or two as you smooth out your cash flow.
  • Consider paying off your smallest debt first. Its motivating to fully pay off your smallest debt and physically close the account. You may have a store card with an outstanding balance of just a few hundred rands. See if you can’t just settle it. You can then use the money that you would have paid monthly to that debt, towards another. This is called the snowball method of debt repayments. See this one on how to pay off debt.
  • You may also consider contacting the institutions where you have your largest debts, or those with the highest interest rates. Most institutions are happy to assist with more favourable repayment plans, especially in light of the lockdown.
  • Consider speaking to a qualified, independent financial planner who can help you draw up a payment plan.

More reading for how to deal with lockdown debt

Remember that as the lockdown levels in South Africa change, so too may your circumstances. This is not permanent. But, if you’re serious about paying off your debt and improving your financial situation for the future, take a look at these articles:

Unwidind the debt spiral

How to pay off debt

Why cash flow matters

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