There are three key financial areas to focus on in 2015 so that you can get back on track financially and that will get you out of debt.
Getting yourself out of debt – your debt repayment strategy
- Make a list of all your personal debts – this will include everything from your car, home credit cards as well as in-store accounts.
- Then pinpoint one account to pay off this year.
- Usually credit cards, in-store cards and personal loans incur the most interest, so start off with at least one of these to focus on.
- Identify a monthly amount in addition to your current repayments to pay towards this chosen account until it is fully paid off.
- If you can, try to pay off double or even more if you are able to.
- Once the account is paid off, close it and move onto the next one.
Your focus needs to be on a long-term investment strategy:
- It is a good idea to save at least 15% of your pre-tax salary towards your retirement.
- Usually tax benefits of retirement vehicles such as pension funds, provident funds and retirement annuities permit you to get elevated after-tax returns.
- If you are keen, a more aggressive strategy will double your investment every six years or so.
- For example if you invest R500 000 today and retire in 25 years’ time, the more aggressive investor should end up with an amount of R8 million while a more conservative investor will realise in the region o R2 million.
An emergency plan in place is important
- Ensure your will is up-to-date.
- Provide enough life cover as well as disability cover.
- Update your will on a regular basis to ensure the people you care about are able to receive the benefits you want them to get in addition to paying as little estate duty as possible.
- With life cover ensure you have sufficient money to pay off your debts and to leave sufficient to provide a base level of support for your dependents; take note that a minimum of four times your gross salary as a cover amount is a good point of entry.
- Disability cover, on the other hand, should cover your debts and provide at least 75% of your current income if something should happen to you.
Don’t be put off by this checklist; it becomes far easier to manage your debts once you put these building blocks into place. If you are not sure of where to start contact a qualified financial adviser to work out a plan; but whatever you do – use the above three key areas to make 2015 the year where you get yourself out of debt.