The massive growth that the country has experienced in the last 15 years (despite the current financial wobblies) has created a stronger and bigger middle class, who was immediately attacked by the credit industry with promises of easy money. And the way it was spun was so delicious that people often fell for it hook, line and sinker. Enter the National Credit Act, designed to help borrowers be more circumspect about taking on debt they could ill afford, and lenders be very wary about breaking any rules for fear of major reprisals.
Perhaps the Act is beginning to have the desired effect, which is one of the reasons why a 100% home loan is a rarity these days, and why it has become so much more difficult to get a bond in the first place.
But what do you do if you’re already in the sinking debt boat? Here are five small tips:
- Drop your standard of living
Even Bill Gates cannot afford everything he’d like to, believe it or not! We all have to make economies, from the richest to the poorest. Be realistic about what you can afford –if you are not willing to make sacrifices then you will keep running into trouble. Forget about keeping up with the Joneses. They’re in more debt than you are anyway!
- Pay off the smallest debts first
Conventional wisdom suggests that this is a great way to feel good about your achievements, because you can see the debit shrinking. When you finish that small debt, tackle a larger one and if possible increase the amount you are repaying each month.
- Increase your income
You can either take on a few extra jobs or you can look for a new one that pays better. Very important though: DO NOT raise your standard of living when you get extra money. Be disciplined and get rid of debt first.
- Acts of service
If your focus is on serving people instead of the debt itself, then strangely you will find it easier to pay that debt off. Oh, and every industry is about serving people – even if you are locked away in a small little office all on your own.
- Patience is a virtue
Credit promises instant gratification, which is a great feeling. But that’s the problem: as Warren Buffett says, don’t ever expect to manage your money if you don’t manage your emotions. Saving for that special something you want first is a great way to become patient and not fall victim to marketing traps that want you to part with your money.
Remember, you’ll feel better about yourself once the cloud of debt is gone.