Rising from Debt
June 25, 2009 by MOYMRyan
Filed under Debt Management
What do you think is the link between debt and recession? It is the people’s tendency to spend way more than what they earn until their debts roll out of control. In this world of rapid modernization, there’s a thinning line between necessity and mere want as everything becomes a necessity for an undiscerning consumer.
If you’re a person who’s neck-deep in debt, to tell you not to spend more than you earn is only half of the advice. There’s a stressful battle to address until you are totally debt-free. It will be a long battle that will require your utmost resolve and discipline.
Set your goals
Make a goal of being debt-free, say, in five years. Then break this goal into a series of smaller ones that will help you get there. Make realistic targets by calculating your future income vs. expense cash flow. Determine what you can give up in year 1 or year 4 and stick to it.
Prioritize spending
An urge to buy if left unchecked can go out of proportions. Before buying things, begin a habit of prioritizing. Make sure that you were able to pay first for the essentials such as food, school fees, rent, car repayments, or house payments. If you spend more on clothes and appliances that you have to resort to credit cards for your groceries or medicines, that’s when you start getting into debt trouble every month.
Reduce the amount of your debt
Without defaulting on other financial obligations, try to pay the full installment every month. Go first for the debt with the highest interest rate while make on-time minimum installments on the others. Then target to pay down the next highest interest rate debt.
Pay off what you can. See if you can even forego savings in your bank since the amount of savings income you get is dwarfed by interest rates being paid on debts. As soon as you’re debt-free, you can always revive this savings account.
Otherwise, if you consider your savings account as your emergency fund, then use any extra earnings – bonuses, overtime pay, raises – to pay down your debts.
Learn the lesson from credit cards
As soon as you’re debt-free, then stay that way by strictly adhering to your budget. Living within your means will surely keep you out of future financial troubles. Use your experience in dealing with the use of credit cards.
Curb at once the urge of charging. Leaving your credit cards at home will definitely help. Better yet, cut up all your credit cards except for one with the lowest interest rate and use that for emergency purposes only. For that credit card, try your utmost best to pay in full installment every month to avoid paying interest.
Write down all the necessary items before you go shopping, and stick to that list. Avoid using your credit card in retail outlets as they usually charge higher interest if you’re unable to pay off your monthly balance.
Be patient
Understand that as it took you time to fall neck-deep or almost buried in debt, it probably will take time as well to get out of it. Keep your resolve and never give up. The reward will always be a changed outlook and a stress-free life. It’s worth the hard work and the wait.
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