How to get out of debt, and stay there – a roadmap to financial freedom

Stian De Witt
7 August 2023
3 min read

South Africa’s savings rate for households, businesses and government is one of the lowest globally, standing at only 0.5%. These and other alarming savings statistics prompted the Savings Institute of South Africa (SASI) to launch an initiative to challenge consumers to live within their means, and to encourage positive savings habits. This effort termed “Savings Month” seeks to initiate conversations around overcoming debt, taking control of our finances and building our general financial literacy.

Debt is a heavy burden to carry

Debt counsellor, DebtBusters, reported that, according to their data, consumers in South Africa need to spend around 63% of their take-home pay to cover their debt repayments. This leaves very little available income to save for emergencies and for retirement. Without emergency and retirement savings, consumers are walking a financial tightrope – one where there is no leeway or buffer for unexpected expenses. Spending such a large percentage of your salary on debt is quite literally crippling. It’s why they call it a ‘debt trap’. Once you find yourself in a debt trap, it is very difficult to get yourself out. By making the necessary changes to eliminate debt, you will reduce your financial burden and alleviate the ongoing stress associated with financial difficulties.

There are many reasons why South Africans are in debt, including the spike in the cost of living, elevated interest rates, increasing inflation rates, electricity price hikes, fuel price hikes, the high unemployment rate, but also the low level of financial literacy. By building awareness and educating consumers about debt, individuals can gain important insights into the impact of debt and financial stress on their lives. It further empowers individuals to have open discussions and discourse about overcoming debt and implementing strategies that empower them to take control of their financial situation.

Debt is bad for your emotional and mental well-being

Crippling debt can have a significant impact on your emotional, physical and mental well-being. By openly discussing debt, it reduces the stigma around the struggles associated with debt, allowing you to feel comfortable enough to ask for help and to get support by talking to a financial advisor. A financial advisor can help you develop workable strategies to reduce your debt. It's also important to remember that many people who ask for help and support feel a lot more at peace knowing that there is a plan in place to turn their finances around.

Prevention and early intervention are better than cure

By discussing debt and debt management, you can prevent yourself from falling further into excessive debt or experiencing severe financial stress. Raising awareness and providing information and education on financial management can help you make informed decisions and adopt healthy financial habits sooner rather than later.

Overcoming debt is critical for long-term financial well-being

Being open to discussing strategies and tools to overcome debt, you can start your journey to achieving true financial freedom. With proper planning, discipline and determination, you can overcome your debt burdens. By taking proactive steps to address debt and financial stress, rather than ignoring or avoiding the problem, you are taking an important first step to securing your long-term financial well-being.

Step-by-step guide to getting out of debt so that you can save more

If you are ready to work at getting yourself out of debt, carefully consider each of these steps as you put a plan in place to achieve your financial goals:

  1. Assess your financial situation: to get started you will need to take a thorough look at your income, expenses, debts and overall financial health. It is important to have a clear understanding of the extent of your debt and the factors that are contributing to your financial stress. Acknowledge the reality of your debt and financial stress, don’t avoid or deny the problem, as this will only make it worse.
  2. Complete a life audit of your finances: look at your lifestyle and your life as a whole. Identify your financial impulses to splurge when you actually don’t have the money. Look at where you are possibly spending more than necessary in your budget, for example, buying takeaways or eating out more than necessary. Perhaps it means packing a work lunch instead of buying lunch on the go. Conduct an audit of your expenses and find the “loop holes” or gaps where you are spending more than you need to.
  3. Create a plan: developing a well-defined plan is an essential step to overcoming debt. This includes setting specific, small, manageable and achievable goals. It also means establishing a budget and formulating a debt repayment plan.
  4. Manage debt effectively: overcoming debt requires addressing outstanding balances strategically. This involves negotiating with creditors to reduce interest rates, exploring options for consolidation or refinancing and establishing a repayment plan that aligns with your financial capabilities. You should also consider focusing on high-interest debts first or using the snowball method to gain momentum by paying off your smaller debts first.
  5. Budgeting and expense management: creating and following a budget helps in tracking income and expenses, identifying areas where spending can be reduced, and ensuring that you allocate enough funds towards debt repayment. Effective expense management is crucial to free up resources to decrease debt and increase your savings capabilities. By developing a comprehensive and realistic budget that includes all income and expenses, you will be able to track your spending and identify areas where you can cut back and free up funds.  
  6. Increase your income: explore ways to boost your income that can help expedite debt repayment and improve your financial situation. This could include taking on additional work, seeking a higher-paying job or looking into opportunities for generating passive income.
  7. Build your financial resilience: establishing an emergency fund provides a safety net for unexpected expenses, reducing the need to rely on credit during challenging times. Saving a portion of your income for emergencies can help prevent future debt accumulation. It also gives you peace of mind knowing that you have a plan B in times of trouble.
  8. Practice self-care: debt and financial stress can take their toll on your overall well-being and mental health. Take care of yourself by engaging in activities that reduce stress, such as exercise, meditation, spending time with loved ones and pursuing hobbies.
  9. Get professional support and guidance: speaking to a financial advisor can give you expert guidance tailored to your specific situation. Financial advisors have the resources, experience and tools to support you in your journey towards financial freedom.
  10. Use all the resources available to you: most financial services companies have a variety of tools available to help consumers manage their money better. For example, NMG offers a product called SmartAlec that aids consumers in developing and improving their financial habits. It enables learning about finances, debt management and debt management strategies. Products like this will help you make informed financial decisions and continue to learn and improve your financial literacy.

It is important to remember that being in debt is not a “game over” scenario. There is hope, empowerment and resilience in taking back control of your financial well-being. By implementing strategies and lifestyle changes, and seeking the necessary education and support, you can overcome debt and reduce your financial stress.

If you feel overwhelmed by your debt and need help navigating to financial freedom, you can speak to a financial advisor at NMG. NMG has several accredited financial planners who have the resources and experience to help you achieve all your financial goals.

T&Cs apply. NMG Financial Planning (Pty) Ltd (Co Reg No. 1999/002506/07) is an Authorised Financial Services Provider – FSP6713  


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