Keeping Over-Indebtedness at bay: Accept, Act and Accelerate

Running into money problems has long since become the least bit uncommon. In fact, most people are confronted by running out of money at certain times.

But, being left with more month at the end of your money, isn’t a default indicator that you’re over-indebted. Fortunately – unlike over-indebtedness - such sporadic shortfalls can usually be remedied fairly swiftly and with relative ease.

Over-indebtedness, however, is more serious, often very complex, and ultimately, much tougher to resolve. In short, it constitutes a complete, or near complete, inability to service debts, cover regular monthly expenses, as well as any day-to-day demands.

Over-indebtedness is pervasive and persistent. It develops and worsens over time. It’s often set into motion by certain unexpected life events, such as retrenchment, divorce, illness or death in the family.

It’s important to note that this beast can very simply, also be unleashed by overspending. Unfortunately, anyone can quite easily, and rather quickly get caught in the downward spiral of over-indebtedness.

So, you get to decide . . . Deny and Drown OR Accept and Accelerate

1. Plan Ahead:

Think of potential financial difficulties you might face and prepare accordingly. This might involve setting up an emergency fund or learning to budget more effectively.

2. Get Credit Insurance:

If you're taking out a mortgage, consider credit insurance. It acts as a safety net in case you face unexpected financial disruptions. It might feel like an extra expense now, but it could save you a lot of stress later.

3. Actively Build Your Savings:

Try to set aside some money each month. This can be your buffer for those incidental and unexpected expenses. Even small amounts add up over time and provide a cushion.

4. Communicate with Creditors:

Should you find yourself struggling to keep up with payments, reach out to your creditors immediately. They might be able to offer extended repayment terms or reschedule your loans. It’s always better to be upfront, rather than avoiding their calls.

5. Maintain a Realistic and Well-Balanced Budget:

Consider your spending habits and cut back where you can. Are there subscriptions you don’t use? Can you buy groceries on sale or in bulk? Also, explore ways to increase your income, like freelancing or selling items you no longer need. Utilise any benefits from insurance policies to their fullest.

6. Sell Valuable Assets Responsibly:

If things get tight, consider selling some of your valuables. But do this only after thinking it through very cautiously, and only when necessary. It’s better to part with things you don’t absolutely need than to sink deeper into debt whilst hanging on to them.

1. Avoid Late Payments:

Late fees add up quickly and can make your debt situation worse. Set reminders or automate payments if you can.

2. Don’t Take Out New Loans:

It might seem like a quick fix, but new loans can exacerbate your financial problems. Try to work with what you have.

3. Stay Away from Revolving Credit:

Credit cards and other forms of revolving credit can be tempting, but their high interest rates can hold one hostage in a never-ending cycle of debt.

4. Avoid Overdraft Facilities:

Overdrafts might seem like a convenient option, but they carry high fees and often require immediate repayment. It’s easy to fall into a cycle of dependence on these.

5. Think Twice About Loan Consolidation:

Consolidating loans can sometimes seem like a good idea, but it often means you’re extending the repayment period, which can increase the total amount of debt you’ll have to repay. Consider all the implications carefully before deciding on this option.

Managing debt responsibly is largely about keeping control over your borrowing habits, spending habits, as well as your budget. It’s key to address financial challenges head-on. Avoid relying solely on borrowing to get through those tough times. Be proactive about managing your finances to prevent small issues from turning into huge problems. The reality of things like unexpected events and rising debt costs will always be lurking, but with careful planning and smart decisions, you can trump these.

Your very first money-smart decision can only then be to Acknowledge and Accelerate.