How to escape the debt trap

by | Jun 24, 2022 | Personal Finance

Dealing with overwhelming debt can feel like being stuck on a treadmill of stress and constant struggle without any way out. It starts out as a small credit card payment here, a car finance there, a store credit purchase once or twice, and eventually the bond purchase you could not have gotten your house without. However, if not carefully managed, debt could very easily turn your monthly budget into a debt-ridden warzone. As a result, every month you are left with very little for your other household expenses, let alone the month end outings and destress shopping habits you brazenly squeeze in, even though you cannot afford them.

This whirlwind of constant agony and anxiety is known as the debt syndrome, and it can lead to catastrophic health problems and even death. The good news is, it does not matter how desperate your financial situation may seem, anyone has the opportunity to climb out of the debt trap and experience financial freedom in their lifetime. Here are a few tips on how to break the debt trap.


Stop using credit

One of the first signs that indicate that your debt situation is spiralling out of control is when you start feeling like you have to rely on taking up more debt on a monthly basis, just to make it through the month. Before you know it, you are going to be taking out loans to pay off other loans, the interest rates will be too high, so you skip a few payments just to afford the bare minimum, and so the anxious nights of worrying about when your creditors will come to repossess your assets, cut your lights off, or worse kick your kids out of school. This is why the first step to addressing your debt problem is to cut off the umbilical cord. Taking on more credit might seem like the easy way out of your problems, but it really is not. So cut up all your credit cards, unlink your cards from all the convenience apps, whatever it takes, remove the idea of using credit from your head. It is not worth it.


Figure out what you can live without

Okay so you probably feel like living without taking out that emergency loan or buying things on your credit card would be impossible, I mean how would you even survive? You can do it by reflecting on your previous spending habits and figuring out what you can and cannot live without. Literally pull out the previous month’s statement and put a plus sign next to the transactions that you would like to repeat, a minus sign next to those you wouldn’t, and an equal sign next to essential living expenses like groceries and transport. This is key to finding out areas in your monthly spend that are negotiable and can help you identify the root cause of your debt problem and pluck it out. Any get-out-of-debt plan that works in the short term may not be sustainable over the long term if it doesn’t align with your priorities.


You can afford the FOMO

In the age of Instagram glamour, workplace socials, and sundowners with the gang, the little devil on our shoulders called FOMO has led us down the evil path of overwhelming debt many a times. As a more mature adult, the FOMO might go much deeper and more costly, with wide ranging societal notions of where you need to live, which car you need to drive, or which school your kids should go to. However, financial experts have come to the very unscientific conclusion that FOMO is the root cause of the vast majority of regrettable spending. Trust me, being debt and financially free is way more rewarding than fitting in to societal standards of perceived happiness. You can still be social on a budget by inviting your friends over for impromptu pop-up dinners at home, ask them to bring something, and voilà, everyone has fun but still gets to save.


Find another stress reliever

Debt or no debt, life can be a very stressful expedition and with therapy being so expensive and time consuming, most people usually just opt for the next best thing to try and fend off the overwhelming emotions of everyday anguish which is to spend money. While this exercise might kick off your dopamine for a short bit, the end result is always the same miserable financial rut that kicked off your depressive spell in the first place.

Break this cycle by swapping your stress relief ritual to other fun activities like jogging, hiking, riding a bike, joining a reasonably priced gym, picking up a baking, sewing, or pottery hobby. There are numerous ways to relieve stress that don’t involve spending a lot of money.


Buy what you can afford, not what you can borrow

This brings us to our next point which may sound simple but, as the unwritten rules of the debt trap would have it, it really isn’t. Spend only what you can afford. We’ve covered not going deeper into debt and staying away from financially taxing and unnecessary habits, but one of the devious ways that creditors might lure you into overwhelming debt is by offering you very attractive credit products that fall right at the edge of your affordability scale. So, the phrase live within your means applies to both cash and credit purchases. Don’t take the first deal on offer, be realistic with your budget and question whether you will be able to pay off your debts, save for rainy days, afford your living expenses, and even spoil yourself every now and then, after taking the credit.


Get into the habit of saving

Building an emergency fund as a way of getting out of debt and staying out of debt can never be emphasised enough. As much as we would all like to live ‘for the moment’ and be completely oblivious to the fact that emergencies might pop up and require money, this trajectory only keeps us locked in the debt cycle. This is because, not having a savings plan for emergency often requires people to take out loans when the rainy days do come.

These emergency fund savings should be coupled with other targeted savings plans for major purchases you would ordinarily just buy on credit. You will be surprised how easy it can be to save for something that you really want when you know that after all that hard work you will have that item you desire – debt and guilt-free.

Founder and Debt Counsellor from National Debt Advisors Sebastien Alexanderson said, part of the torment of overwhelming debt is that most of us often attribute it to personal failure when it is actually far from that. “There are numerous contributing factors to overwhelming debt, from faltering economies, all-consuming responsibilities, or simply learned unhealthy money management habits. The latter refers to all the unsavoury financial conducts we are all socialised into during our upbringing. However, even if your parents were always in debt and that’s all you know, it doesn’t mean you have to live like that forever,” said Alexanderson.


He cautioned consumers from allowing spiralling debt to take over their lives saying there is always a way to swim out of overwhelming debt. “Because they don’t see a way out of it, most people often choose to ignore their debt, hoping it might go away. The first thing to remember is that you are not alone, and help is available,” said Alexanderson.

Take the first step towards your financial freedom today, contact NDA, we can help.

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