Debt Clearance, the last hurdle
Debt clearance is the last hurdle you must overcome
You are almost free from your debt nightmare and you have found the best way to clear your debt was through debt counselling from a leading debt review firm. Now for the last step in your journey – debt clearance and getting that debt clearance certificate in your hand. (Still need advice on how to settle your debt? You can get an assessment here.)
So what is debt clearance?
According to the National Credit Act, when a consumer who has settled all his/her debt in terms of debt restructuring he/she must receive a “Clearance Certificate” from the debt counsellor. Once you have a certificate, your debt advisor can alert credit bureaus who will then clear your credit record.
Once you have your Clearance Certificate, which will show if you have entirely completed your repayment plan as agreed with creditors, you will again be able to apply for credit once again.
This certificate bestows upon you the same rights you had before you ever made a cent of debt.
The slate is wiped clean.
Anyone who has successfully undergone the debt review process will be relieved that their journey with over-indebtedness has come to an end, but having been caught up in that process, they may not yet have a plan for their future financial stability.
You may have learned a few things here or there in the process of undergoing debt review, but what will your life be like after debt clearance has occurred. Will you fall into the same patterns of committing to payments you have no way of making?
What you may want to think about after your debt has been cleared:
Recently, in a quiet part of the internet where white walls and stark furniture placements dominate, a velvet revolution against consumerism and over-committing to debt and over-complicating one’s life has blossomed. Comfortable minimalism is what it comes down to, as it’s not the extreme form of minimalism we all might hear about. An example of it can be found here. Blogs on the subject question why we have this insatiable need for more, more possessions, convenience and therefore loans and really what is behind that.
Although you may not agree with the lifestyle of minimalism which to some may seem a bit off centre, there are a few good pointers we can take from these individuals who have decided to simplify everything from their clothing to their living arrangements, but most importantly, their finance and spending habits, in order to live a happy, fulfilling life.
You might remember the feeling of life being too complicated, after having been entangled in debt and harried by creditors in your past. Your life was a bit of a harrowing time right, consumed with worry you just wanted all the problems and responsibilities to go away and longed for a time before you became indebted. Many people share this feeling and ache to simplify things.
You now have what they long for, debt wise at least.
So here you are, you’ve just had your name cleared of debt, and you have that golden ticket, the Clearance Certificate. Do you run out and get a loan? Or do you stop and pause and consider your luck?
You now have no debt whatsoever or very little. Let that sink in.
That’s the golden moment. The money you always used to spend on your debt is now yours and you decide what to do with it.
Many people might go out and buy things that will make their lives ‘convenient’. Before realizing though, we may be complicating our lives when making some of these purchases, by confusing our wants with our needs. Sometimes we just end up acquiring more things to maintain, clean, store, repair and pay installments on, things that we don’t use.
Now what is the next step?
That is a serious question, as it may mean failure or success. What should you consider as you move forward from being debt-free?
Plan for every Rand
First off, you need a monthly budget like a heart-transplant patient needs a heart. It’s not really a suggestion in as much as needing to breathe as a suggestion to stay alive. You may laugh, but from past experience with indebtedness you know how bad things can get, right?
Joshua Fields Millburn and Ryan Nicodemus, the two friends behind The Minimalists ask readers of their blog to first identify all of their expenses as either “Need, Want or Like” and to write down absolutely every expense, then list it under these categories and recheck the list to be certain. Cutting from the Want or Like list is what they suggest. Another neat trick they have is to make sure every Rand(unit) of your income/salary is assigned a destination, a purpose at the beginning of the month. This entirely eliminates the idea that you’ve got cash to spend which usually gets us to fork out money for things we don’t actually need.
Look to the horizons
Invest your money in the future, they also argue. So look at investing for your retirement or for a goal in the next 5 or 10 years and immediately set the money aside every month so you don’t get used to having that extra cash to splurge. In so doing you also build up peace of mind little by little and know that you are first taking care of yourself financially.
Debt free forever?
What, really?- A controversial statement made by some minimalists is that there is ‘no such thing as good debt.’ You know yourself enough to understand whether you need to make that choice to remain entirely debt free and banish the temptation completely, or just to take things slow and steady. Will it do you any harm to think about this option?
Safety net/emergency fund
Safety fund – You hear this from financial gurus like Suzie Orman and others, and whatever you may think of her, you’d be hard pressed to find someone who disagrees with the advice of building up a financial safety net/emergency fund. Usually it comes down to saving enough to cover all your expenses for six months. Meaning you will have to save enough money to cover your rent, your children’s school fees, groceries etc. You can do this by setting money aside in your monthly budget to build up this fund over time.
Simplify and save big
Being of the belief that material possessions can weigh you down, some minimalists take a less extreme route and ask us to consider whether we need everything in our houses which we haven’t used for the last couple of years. They suggest we simplify for the financial gain of it. From a pure financial point of view, it’s something to consider. If you have to pay rent for a three or four bedroom house when you and your spouse live alone, is it not better to simplify to a two bedroom house and save buckets of money paid on rent monthly? You might then use the money to travel, or even invest it.
Is it a Want or Need?
A central theme when simplifying your life which can also be used when looking at your spending habits, is asking yourself whether you actually need versus want what you are attempting to buy. Take the example of buying the latest version of a Smartphone you already have the older version of. Do you really need it? Will it really make that big a difference in your life?
So once you are clear of debt, sit down, make a plan, draw up a budget and be perfectly honest about your spending habits, you know what trips you up to make more debt every time. Address these problems before you are forced to become overly indebted again.
You, and only you can stop the cycle of becoming over-indebted once you have been cleared of debt. Don’t be too harsh on yourself though, everyone has slip ups, just take things slowly and know your weaknesses in order to control your spending.