Thinking about paying off your debt? Take our three-month debt challenge to get you started on reducing your debt – and your stress! – and ultimately put more money in your pocket.

First thing first – get organised!

Before you begin the challenge, you need to draw up a plan following these steps.

Identify all your debt
You will need this information:
● Everyone you owe money to – your creditors
● How much you owe
● The interest rates
● Term of credit – how long you have to pay the debt
● How much you pay each month

Include any loans from family, clothing accounts, personal loans, credit cards and store accounts, any home loans or vehicle financing. If you can’t find the information you need on your account call the store or bank to find out the details.

The next step is to put all this info into a spreadsheet. We’ve designed a simple one that you can download and update.

Include debt repayments in your monthly budget
Now that you have identified what you need to repay on all your accounts every month, the step is to draw up or review your monthly budget to make sure it includes all the repayment amounts. The key to getting on top of debt is to service all your debts by paying the full instalment every month and finding some extra money that you can put towards paying off your debt. Even if it’s only an extra R100 a month, it can make a difference to reducing your debt and reducing how much interest you pay.

Decide how to allocate those extra funds to repay your debt
When you have budgeted a little extra for debt repayment, you need to decide how best to allocate that money. Which debt you are going to pay off first? You have two options:

Pay off the most expensive debt first
This is the debt with the highest interest rate. Paying this debt off quickly means you can save on those high interest charges.

Pay off the debt with the smallest balance first
This is the debt you can clear in the shortest time. Paying off one debt leaves you with one less debt, money to use to pay off other debts, and gives you a sense of accomplishment.

Now you’re ready to begin the 3-month challenge!

Month 1: Pay all your instalments and repayments, including the extra amount!

Make sure you actually pay the extra amount into the account you have identified. Just make sure you don’t incur any extra bank charges.

Update your spreadsheet – do this every month, so you can see how the amount outstanding reduces. This is very motivating. It’s a bit like seeing the numbers on the scale go down when you lose a few kilos!

Month 2: Keep your focus

Keep on paying your debts, plus a little extra, and updating your spreadsheet. Then try some of these ways you can motivate yourself to keep on track:

Find a Debt Buddy
If you have a friend in the same position, it can be motivating to share your tips, hopes and fears, and successes. You can also challenge each other to see who can pay off a similar debt fastest.

Decide what you want to do when a debt is paid
When a debt is paid, you will have extra money in your pocket every month. What have you always wanted to do but couldn’t because you didn’t have extra funds? Write this down, work out how much it will cost and have a plan to do it when you have paid off some of your debt.

Month 3: Prepare to go debt free

Now it’s time to take it up a notch and plan for the debt-free life that you are working towards.

Look for some extra funds
This can be an exciting new project. Perhaps you have a skill you can use to make extra money such as singing, sewing, gardening or babysitting. Could you do an extra shift at work? Or get a part time job? Or house-sit during the holidays? You can also have a spring clean and see if you have any unwanted items you can sell for cash. Put this extra cash towards paying off your debt.

Manage your store, credit card and bank accounts
You want to make sure you don’t get into more debt. Go through all your store accounts and credit cards. Do you really need that account or is it just going to tempt you to get into debt? If you do decide to keep the account, consider taking the card out of your wallet and leaving it in a safe place at home. That way, it’s less easy to spend.

Consider whether you need the account
Once you’ve paid off a debt, decide if you want to close the account permanently or keep it open. Some experts recommend closing accounts so that you are never tempted to spend again. But accounts are a way of life, so this isn’t always practical, so you could choose to keep your account card at home and not in your wallet.

Building a habit

Over three months you’ll have built some good debt-busting habits. You’ll see that you can make a dent in your debt. Now you just need to keep up those good habits! If you do, you will reduce your debts and reduce the stress that goes along with them.