A debt reduction strategy is the only way to get out of debt permanently. You need to become a debt-dung beetle! You may be wondering what a dung beetle has to do with being debt free. The humble dung beetle packs animal dung into a tight ball and rolls it away, adding to it along the way. It gains momentum, and the ball grows as it moves forward.
How Does the Debt Dung Beetle Method Work?
The debt dung beetle method is a debt-reduction strategy to eliminate your debt in order of the smallest to the largest, gaining momentum as you settle the remaining balances. When the smallest debt is paid in full, channel that minimum payment amount into settling the next smallest debt you have.
Debt reduction and becoming debt-free will start with the following steps:
- List all your debts from the smallest to the largest irrespective of interest rates. The easiest way to see a summary of all your debt is to draw your credit report.
- Make minimum payments on each of your debts
- Pay as much as possible on the smallest debt
- Repeat the process until each debt is settled
While interest rates are a concern in South Africa, your largest debt, such as a home loan, will have the most interest, so it will be long before you see a dent in that balance. Stick with the strategy; you’ll be over the moon when you pay off the smallest debt quickly.
This will motivate you to keep going. It is also advisable to consider alternative means of income, such as selling an underutilised asset or getting a side hustle to boost your income to increase payments. You could also cut spending, redirecting those savings into eliminating the debts.
Why Does the Debt Dung Beetle Method Work?
This method works because it’s about changing your behaviour. The behaviour change becomes a habit, and you will stay motivated to continue. If you begin chipping away at the largest debt first, you won’t see much progress other than a small reduction in your balance.
You’ll soon lose steam, stop paying extra, and still have all those small, annoying debts to contend with. With the debt dung beetle approach, you’ll see quick progress as you roll away the debts individually.
Here are some personal finance tips to help you along the way:
- Setting a budget is the starting point for every financial goal you set yourself, including debt repayment.
- Tracking your net worth, which is the difference between your assets and debt, will tell you where you stand financially.
- Considering an all-cash diet will help you get out of a rut if you’re constantly overspending. This will help to reduce adding more debt.
- Set specific financial goals, such as how much you want to save, how much debt you want paid off, and by when.
- If you have a mountain of debt, start by paying off the small debts to give you confidence when tackling the bigger ones.
- Know what your credit score is and keep track of your credit report.
Connect With Debtline
Do you need more advice on how to manage your debt and finances? Contact Debtline. We provide debt review with an NRC-registered debt counsellor. We also offer tailor-made debt solutions based on what you can afford.
You can begin your journey to a debt-free life within minutes. Take control of your future and learn more about becoming debt free.