This is the fourth post in a series aimed at equipping you with the knowledge and skills to enable you to make more informed decisions about your finances and lifestyle. Please read the first post here
http://bit.ly/1sF655Jand the second post here
http://bit.ly/1sHiRAB**************************************************************************************************
By borrowing money, you can get what you want NOW. Borrowing money is also referred to as credit. Unfortunately, we often take many things on credit and the monthly payments become so big that we can no longer keep up with them. This is when we ‘fall into arrears’ or in other words, we start to miss payments. This is how many people get into the “debt trap”.
Dealing with creditors and the consequences of bad debt
If you fall behind on debt payments you will start to receive calls from the people you owe money to, who are also known as creditors. You are a debtor. You should not avoid them but rather explain your situation. If you are not too far behind they may let you pay less for a few months until you are back on track. If your creditor takes you to court and gets a decision in their favour:
1. The creditor can ask for a garnishee order against your salary. This is a court order demanding your employer to pay the debt for you out of your salary, before you are paid.
2. If you have a judgment against you, it is recorded at the credit bureaus. This is also known as being blacklisted. A credit bureau is an organisation that keeps records of every individual who has credit.
People who lend money, like banks and some retail stores, always do a check on your name before they give you credit. If you are listed as a bad payer at a credit bureau, you may be prevented from borrowing money, because the would-be creditor will see you have a bad credit rating and won’t lend you money.
Manage your debt-related stress
The following tips will help you work through the problem in a calm calculated way:
• Face the facts and get help - make a list of everything you owe and work out how much you are short by each month. If your expenses exceed your income by a large amount you may benefit from debt counselling.
• Stop spending immediately - you will be surprised how much you can save if you really put your mind to it.
• If you have a savings plan put it on hold until you have sorted out your debt.
• Another way to get out of debt is to increase your income - You may need to find a weekend job.
• Identify your spending triggers - if you can’t resist buying new clothes stay away from the malls.
• Remember that this is for your future - once out of debt you can make plans to build wealth.
• Don’t hide the facts from family – don’t feel ashamed, lots of people get into financial difficulty.
• Credit cards used wisely can be useful, but if you abuse them, can land you in hot water.
