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How to get out of serious debt

CORRESPONDENT
Innocent has just received a letter from his employer. He knew what it was going to say. It’s a financial embarrassment letter - warning that he has fallen below the minimum acceptable net take-home salary.

Innocent feels that the letter is very stern: it states that he must find a way quickly to improve his situation, or face disciplinary action. If he loses his job, he will have no income, and then his creditors will chase him even more... What can Innocent do?

 

Acknowledge the problem

Innocent has been ignoring the warning signs for too long – he’s got himself deeper and deeper into debt. He’s borrowed from one lender to pay off another, and he hasn’t found any way out.

The first step in this situation is to acknowledge that if you’re in a bad financial position it almost certainly didn’t happen overnight. You’ve made some bad financial decisions and, unless you make some changes in your behaviour, you aren’t going to find an easy way out. Be honest with yourself. Secondly, you need to realise that it will take time and especially lots of effort on your part to fix the problem. 

Innocent must seek a path to follow in order to take control of his debts and bring his take home salary up to way above the minimum “allowed” take home salary. He therefore decides he is going to ask for professional help. He must look for someone who can support him and guide him through this hard time.

Those who give advice to people like Innocent on how to get out of debt are called Debt Counsellors.

 

What to look for from a Debt Counsellor

When you are looking for a debt counselling service, it’s important to find out as much as possible about them before you pay any money.  You are allowed to ask questions, such as:

l Who are they?

l Are they independent, or are they connected to a bank, insurance company, or loan company?

l Are they just selling you another loan?

l What qualifications do they have?

l How much are their charges?

l How do they make their money?

l What are their expectations of you?

l How they plan to assist you?

You can then make an informed decision if they are right for you. You will also know what to expect from the process, and how much it is going to cost you.

 

The Debt Counselling Process

Debt Counselling can be a long process; it will not fix your problems in an instant, so don’t expect this or ask for it. You must be committed to putting in effort - under the guidance of your counsellor. This will involve communicating with your lenders, learning new behaviour patterns and getting self-discipline - to get yourself out of debt and back on

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the path to Financial Wellness.

 

Step 1: The First Meeting

In the first meeting you and your counsellor will get to know each other. If you do not like the person you are talking to, then ask for a different counsellor, otherwise you may fail to work with them. 

The counsellor will ask you questions about yourself and your family. They’ll discuss all aspects of your life, so be prepared, and take as much information with you as you can think of. This will save time and show the counsellor that you are committed to getting yourself out of debt. Remember it is very important to be open and honest, do not hide anything. 

If you agree to work together, the counsellor will walk you through how the process will work and explain the costs involved.

 

Step 2: Analysing Your Debts

Your counsellor will need all the information on all of your debts and assets: bank accounts, credit cards, employer salary, loans, etc in order to give you the best advice. They will usually at this point ask you to pay their fee to formally engage their services.  They’ll lay out the structure of how your relationship will work, and explain to you what is required from you from this point on. You will be expected to visit your creditors, inform your employer of your Debt Counselling status, and visit your bank manager. Your counsellor should guide you, but you’ll also be putting in effort yourself. 

You must be prepared to do a lot of the work; it is not your counsellor’s job to visit companies on your behalf. If you want to get out of debt, you must be prepared to help yourself.

 

Step 3: Educate Yourself So You Don’t Get Back Into Debt

It is important to seek Financial Education so that you understand your money and how to manage it to protect you from getting back into a similar situation. If you follow the guidance of your counsellor, keeping in touch with them, you should be able to get debt free over time.

The most important thing of all is: Don’t get back into debt!  Don’t spend money that you haven’t yet earned - Live within your budget!

*Neo Tshekedi is Sales Manager with Kalahari Training Institute (Pty) Ltd, fondly known as KTI. Kalahari Training Institute is the premier provider of vocational training in Botswana, working with employers around Botswana to upskill all Batswana in the workplace for personal growth and productivity.

KTI offers over 50 BQA accredited courses in all fields of business and industry.

 



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