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By Zulika van Heerden


If an ounce of prevention is worth a pound of cure, then preventing oneself from getting into debt should be on top of the list for any responsible consumer.

But it isn't, and the statistics are shocking: in SA alone consumer credit to households is estimated at R760bn. There are a staggering 80,000 judgments for debt per month.

 Other countries experience the same problem and US households for example have around $50,000 average overall debt and UK households slightly less.  Everywhere, an increasing number of borrowers are growing increasingly concerned about their capability to manage their debts.

Getting On Better Terms with Debt

If you happen to be one of the people saddled with debt and are looking for a way to get out of it, you need not despair. You're not alone and there have been people in situations similar to yours (or even worse) that have been able to reduce or eliminate their debt problems.

There are several ways of dealing with your debt: depending on your case, you can renegotiate your terms with your creditors. Or you could consolidate all your debts through a debt consolidation company and reducing your monthly debt payments.

All of these methods of dealing with your debt rely on one simple premise: the debtor must be generating some excess money with which to pay back the loans.

This is where many people get into trouble, because they either don't know how to budget their money or refuse to confront their financial situation fully.

 Companies that are in the personal loan management trade usually have some sort of budgeting service for their customers. One can even find free budget planners and worksheets online. For people struggling to pay back what they owe (and even the lucky ones who don't need to worry about such a thing), it's fairly simple.

Budgeting

First you have to set aside time to formulate your budgeting plan. You can work with a budgeting application on your PC, or just use pen and paper—the main thing is that you get it done.

You need to add up your monthly expenses. Rent, food, fuel, subscriptions—itemize everything as accurately as you can. Afterwards, compare the resulting amount to your net income (after taxes and whatever other deductions you incur, such as maintenance, child support, etc.).

 If you have money left over after all the expenses have been deducted from it, then you have positive cash flow and can now start to plan about applying that towards your debt reduction. If you don't have money left over, or worse, find that your expenses are greater than your income, then your only choice is to make some changes in your life so that your income is greater than what you spend.

 This means cutting on your spending whenever and wherever you can, getting a new job, etc. The reward after all this is getting back control of your finances and your life.

For more on debt related articles click on any of the links below:

Types of Debt Consolidation Loans
Debt Consolidation Advantages
Are your debts keeping  you awake at night?
Is Debt Consolidation for You?
Good Debt vs Bad Debt



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