Tips for being better with your money after debt
The festive season and the new year are fast approaching.
Now’s the time to start thinking about the resolutions you’d like to make when January rolls around.
One of the big things that many people would like to change in the new year is their finances.
This is especially true if you’re in the process of repaying or have recently repaid debt.
Many people think that they can immediately get back on track after repaying debt. They think they can make some resolutions about being smart with their money and go on to enjoy a debt-free life. But the reality is that for many people, resolutions are short-lived. It’s likely that you’ll be back to your old ways by the end of January.
That’s because you aren’t really addressing your financial problems. You’re trying to put a plaster on your bad money habits and that’s never going to work. That’s why you need to be aware of this, so that you can begin to make good financial decisions – now. So, here are some tips to help you get into the money mindset you’ll need to be better with your money after repaying debt.
Figure out your plan
Now is not the time to hide. Now is the time to get out all your outstanding bills and bank statements, and calculate the true total of your debt. Add up your student loans, store card bills and credit card debts. Have that big number in front of you and face the reality of your situation. Now, you’ll need to calculate how much you can afford to put toward your debt each month. Maybe it’s R1000 or maybe it’s R100. What’s important is that you are paying the minimum amounts each month and then making some additional payments. Next, you need to figure out what you’re going to pay off first. Some in the financial sector think you should first focus on paying off the debts with the highest interest rates. Others feel you should pay off the smallest debts first. The thinking here is that you’ll be motivated and gain momentum in your debt repayment journey.
Track your spending
Sit down with your bank statements and have a look where you’re spending each month. This allows you to really analyse what’s going in and out of your accounts. You’ll know exactly what money is coming into your bank account each month and you’ll also come to understand exactly where you’re spending your money. For instance, you might think that you don’t often go out to eat. By looking at your bank statements, you might find that you actually spend at least R1000 each month on eating out.
Understand where you went wrong
Once you’ve tracked your spending, and gone back at least three to six months, you’ll soon see where you’ve gone wrong in the past. You’ll know that you have a weak spot for a certain clothing boutique or Sunday brunch, expensive new technology or the latest bestselling books. Knowing where you’ve gone wrong in the past will allow you to think more clearly when faced with temptation.
Put processes in place to stop excessive spending
Once you understand your habits, you can form new ones. You can unsubscribe from newsletters and unfollow social media accounts, you can talk to friends and family about eating more meals at home rather than eating out and you can change the way you drive home from work to avoid seeing your favourite haunts. All of these steps can help you to change your habits.
Learn to be okay with what you have
Once you’re used to your new lifestyle, one without new clothing or books and without eating out at the newest, hottest spots, you’ll eventually find you don’t miss it. You’ll form new habits to replace your old ones. Instead of walking around at a nearby shopping mall, you’ll enjoy walking in nature. Rather than shop around for the best deals on shiny new objects, you’ll find yourself researching the best possible retirement investment options and the ideal funeral cover available in South Africa for you and your family. Yes, it’s not what you’re used to. But your new habits will soon seem completely normal.
Paying off debt is not easy. But it is worth it. You will soon feel so much freer. The money that you earn each month will be yours to do with as you see fit. You won’t be forced to spend a massive proportion of your money on debt repayments. This will allow you to spend on things you might never have thought possible – investing for your retirement, university education for your children or an overseas holiday. Those are what might be possible after debt repayment.