Focus on managing debt before tackling saving

Carla Oberholzer

THOSE overly optimistic messages about investments, putting more savings towards funds and tucking extra money away that are flooding your inbox, phone and other communication media are beyond ridiculous given the circumstances.

Putting money towards savings is an impossible task and an unreasonable expectation. Rather focus your energy on managing your debt, because once you clear your debts and work on managing your debt, you can save money faster and reach your financial goals.

Whether or not you had savings before the pandemic, dealing with any financial emergency or crisis is extremely challenging. It is, therefore, crucial in times of hardship that you pro-actively try to manage any debt before tackling growing your savings.

July is National Savings Month, and, of course, saving is a fundamental financial goal. But the times have not been kind, and it is, therefore, imperative that you do what is possible instead. First things first – focus on managing your debt. It will enable you to fix your debt and lead the way to accomplishing your saving goal(s).

You may ask: “How and where do I start?” Familiarise yourself with two essential aspects:

First, embrace the advantages of implementing an effective debt management plan, which will:

• Free you from being over-indebted.

• Empower you to stop your debt from spinning out of control.

• Provide you with some “moveable space” to negotiate with your creditors when your financial situation may take an unexpected turn.

• Give you the capacity to deal with your finances hands-on.

• Enable you to gain control over your finances and financial situation.

• Grant you an opportunity to stay on track to reach your critical financial goals. In other words, working on your savings (as one of your goals) and your various future saving ideals that you may have.

Second, know what debt management involves. Debt management is:

• Having an overview of your entire financial situation.

• Determining your debt-to-ratio income.

• Ranking your debt accounts (according to what has lasting value and increases your wealth).

• Setting up a budget according to your needs.

• Knowing how to use your budget to meet your future financial goals (such as saving).

Become acquainted with the above tips and them to your financial plan, so that you can move from a position where you feel overwhelmed to becoming proactive with your finances.

You are only truly able to reach a vital financial/savings goal (whether saving for an emergency fund or further studies) when you start managing and clearing your debt. Remember, step by step, bit by bit, slowly but surely and day by day – you can do it, and you will get there.

If you have tried executing a debt management plan and you still require professional help to fix your debt situation, make sure you get the assistance that you need. Go to a trusted, authorised expert such as your banker, financial planner, or, in severe cases, a registered debt counsellor. And change your situation from being over-indebted to experiencing financial freedom and having the opportunity to save money.

Carla Oberholzer is a debt adviser at DebtSafe.

* The views expressed here are not necessarily those of IOL or of title sites.

PERSONAL FINANCE

• The national lockdown may have encouraged a culture of app-based savings

• Five tips to help you save more money for future well-being

• Mboweni names board to advise on pensions