D1 - The Plan We're Using to Crush Our Debt for Good

Introduction

Our debt-busting strategy is still a "work in progress". At this stage, we don't have an exact plan.

But, I consider myself to be a very logical person. A "thinker" and "strategist", so to speak. Therefore, I am going to let common sense be our guiding light. That combined with logic and intense research.

What also drives my mission is the fact that I have some trust issues—or so I've been told (lol). Trust issues, specifically when it comes to people telling me what's best for our money. So, for example, if I read an article that tells us to put all or most of our financial eggs in one particular basket, common sense will tell me that this can be a bad idea. Further research on the subject will probably confirm my logical thinking.

Here's logic guiding me.....

Step 1: Create a Surplus

We treat our household finances as if we’re running a business—a business we desperately want to succeed. Currently, our "business" has substantial debts. We need to make the business financially healthy again. That's essentially what the first part of this blog is about - debt elimination.

We can't ignore the fact that we are in financial trouble. We are drawing a "line in the sand", saying, "We've had it! Enough is enough!" This business must not only survive, but thrive because the ultimate goal for us is financial independence.

First, we will compile a monthly income statement, just like any business would, to determine if we have a profit or a loss - or, more relevantly, a surplus or deficit.

When our income exceeds our expenses, we generate a surplus (Income + Expenses = Surplus or Debt). This simple concept is easy for anyone to grasp. No matter one's circumstances, the key idea is to create a surplus. From there, we can build financial security for our future.

I quoted to emphasize that you must spend less than you earn. If we adopted this mentality earlier in life, backed by discipline, we most likely would not have been in this debt situation. But, let's leave the past in the past.

I must add, however, that we are not alone. Statistics show that many people have shared our struggle. The following from an article written on 25 May 2025, compliments of https://finmark.org.za/knowledge-hub/articles/12-million-adults-struggle-with-debt-while-relying-on-credit-to-cope?entity=news :

An estimated 10 million South Africans are over-indebted, with 37% of formal credit borrowers facing repayment issues. Including those borrowing solely from informal sources, the figure rises to approximately 12 million adults facing financial distress

The Difference Between an Income Statement and a Budget

Before going into more detail, let me point out that there is a distinct difference between an income statement and a budget:

A budget is a plan for spending money, while financial statements (our Income Statement) reflect the actual money spent.

Ok, so I'm getting a bit technical here. It's in my nature (lol). I think for purposes of this blog, let's say they are actually the same thing.

We will list all our monthly income - specifically, our take-home salaries (after tax and deductions) - and all our monthly expenses. Hopefully, when we add up all our expenses and subtract that from our combined income, there will be something left over. If so, this difference becomes our surplus. If not, it's a deficit.

The surplus is where the magic happens. Without a surplus (i.e. a deficit), we risk falling deeper into debt. In fact, we don't "risk it", we will fall deeper into debt. Our focus will therefore be on maximizing this surplus. To achieve this, we will closely examine our expenses and seek ways to increase our income. Once we determine our initial surplus, we'll know the amount we can allocate toward our debt payment each month - or at least a portion of it.

By the way, logic tells me that we need to include the interest on our debt, as part of our monthly expenses. So when/if you are planning on doing the exercise yourself, don't forget about that. I have put my own custom spreadsheet in the resources section for you to use. You can find it here. I realise that most people will probably be reading this blog from their cell phones, so perhaps save the file to your device and then email it to a laptop or something.

Any extra payment we can make towards the debt over and above the interest (and account fees, etc.) will effectively reduce the principal portion of the debt. For example, if our total debt is R100,000 with a monthly interest of R1,667 (calculated as R100,000 x 20% per annum(p.a.) / 12 months) - assuming the bank is charging us 20% annual interest - and we only pay the interest portion of the debt (R1,667) each month, the principal portion will remain R100,000 forever and ever, and the debt will never go away.

an illustration showing the principal portion (liability) of debt, and the interest portion (expense)

In this scenario, we will effectively be paying someone (the bank) a "soft" income for the rest of our lives. However, if we pay the interest portion (R1,667) plus anything extra which we can get from a surplus - let's assume R5,000, totaling a R6,667 payment towards our debt -we will effectively be reducing our debt by R5,000 every month. Thus, the debt decreases from R100,000 to R95,000 the following month, to R90,000 next month, etc., etc. This is something we are planning to achieve as quickly as possible.

Step 2: Create and Stick to a Budget

The next step involves building a budget that keeps our surplus intact. In other words, we need to avoid disrupting our plan of paying off a R5,000 (or whatever the amount is) monthly chunk of our debt capital/principal, as shown in the above example.

However, I predict that budgeting isn’t going to be that simple. I expect several potential challenges/pitfalls along the way. For example:

• Unplanned expenses – those surprise costs life throws at us

• Fluctuating expenses – such as bills for water, electricity, and fuel

• Annual expenses – that we never considered, like car licenses or services

• Variable income – especially with commission-based salaries (in my case)

Ultimately, these factors can disrupt our plan, therefore we need not only allow for expenses like unplanned expenses and emergencies, but also consider things like annual expenses and allow for them in our monthly budget by taking the anticipated annual expense and dividing it by 12 months.

We'll build a budget spreadsheet that details all our income and expenses based on our Income Statement. Alongside this, we will include a column for our budgeted (anticipated) income and expenses for each month over the next five years. This method allows us to project future income and expense changes, giving us a realistic outcome of how our surplus will be utilized.

Step 3: Execution and Tracking

Once we've addressed all the above and established a thorough budget, we can set our plan into motion. After this point, things should ideally go smoothly. That said, sticking to our budget - despite accounting for every potential expense - is going to be our real challenge. How will we ensure we stay within budget?

We think the answer lies in consistently tracking our spending. Much of our focus, therefore, will probably revolve around the subject of managing our budget. I am therefore, creating a blog category now, called Budgeting. Later I will include our own personal budget for you to view.

Step 4: Accelerating the Plan

To speed up the process of eliminating our debt, we plan to:

• constantly scrutinize our reduce expenses as far as practically possible

• seek multiple ways to increase our income

  
  

Every additional rand we save or earn could help us diminish our debt load even faster.

In fact, we have just decided that we need to also add a blog category dedicated only to side-hustles. We plan on not only researching some of the popular side-hustles out there, but actually trying them out and sharing our experience in terms of effort and time versus income. That should be interesting, so stay with us.

Before We Start

Before diving in, I strongly feel that we should research several other related topics which could help change our path for the better, such as, but not necessarily limited to:

• debt review

• debt consolidation

• personal sequestration (coming soon)

  
  

Conclusion

In summary, this is our plan for overcoming our debt. While it may present challenges, with the right strategies and consistent effort, we are confident it is achievable.

Until then, take (financial) care!!

Head on over to our next post D2 - We Asked Ourselves: Is Debt Review Right For Us?

NB: MAKE SURE TO HEAD OVER TO OUR DISCLAIMER AND DISCLOSURES SECTION.