If you’re not one of the approximately five million South Africans currently battling debt then you most likely know someone who is among them. A large percentage of the country is currently under debt management or seriously considering it, and the vast majority of this is simply due to poor financial habits. A great deal of the time we find ourselves seduced into living the type of lifestyle we see people engaging in on TV shows, or even our close friends who don’t earn any more than we do driving fancy new cars and wielding the latest cell phone. It all comes down to the image of an idealistic lifestyle which is based on an unstable house of cards – credit cards.

A seemingly endless number of articles and books have been published on the topic of reducing your debt and living a life of good financial habits, and they’re all based on two simple rules:

1. Earn more than you spend
2. Invest what you save wisely

It’s a principal which applies to many undertakings. A similar one works for weight-loss: don’t take on more calories than you’re burning each day. So considering the simplicity, why do so many of us struggle to comply?

Again it comes down to the desire to live a more opulent lifestyle than we can actually afford. Saving seems very difficult when there are so many options for having everything you want now at a seemingly insubstantial price. But, as those five million and other South Africans know, the cost is far higher in the end than they ever thought it could be.

To get on the highway to long-term financial freedom here some steps you can take today:

Step 1: Assess how much debt you actually have
This seems simple but it may not be depending on how convoluted your debt has become. If you’re married and your spouse has somewhat separate debt then that needs to be added in as well.

Step 2: Work out how much living with debt is costing you
So now that you have the principal amounts you can work out the interest you’re paying on them. You’ll quickly discover that you’re in for far more than you first thought. If it’s not all adding up then you may not have taken compound interest into account.

Step 3: Identify the sources of your debt
The cause of your debt may not be anything as obvious as that new car or the five new cell phone contracts for the family (though if you’re currently involved in debt management it could be). A large percentage of the time debt is accumulated by everyday lifestyle decisions. Some extra clothes here, some luxury shopping items there.

Step 4: Take a spring cleaning approach
Accept your real, current financial limitations and cut those luxuries out of your life for the time being. Repair rather than replace, buy with cash rather than cards.

Step 5: Create a household budget
Situations often seem surreal or remote while they’re simply concepts in your head. Taking your financial assessment from previous steps into account, create a household budget with your net income and minus all of your essential expenses, including your debt repayments. What you’re left with is your actual cash flow per month.

Step 6: Implement a healthy financial lifestyle
This means take that remaining cash flow and applying it in the cleverest way possible. This often comes down to making wise investments. If purchasing shares in companies is far out of your comfort zone then at least ensure that your retirement and life insurance policies are in place. If possible, expand on that retirement policy. Any excess income should be saved or used to pay off remaining debts faster.

Essential Insights
Remember that it’s all income VS expense, the difference being that it’s actual expense VS perceived expense. Don’t be lulled into the false comfort which credit cards promise. There’s always a cost for convenience and make no mistake that you’ll always be the one to pay – there are no exceptional deals. If you’ve already made several serious attempts to get to grips with your debt issue then a professional debt management service may be the right move to bank on.