Financial Plan to Get Out Of Debt:
Grow your baby called FINANCES.
To Get Out Of Debt and stay out of debt
You need to do a few things:
- Keep track of your spending
- Know what your cash position is
- Pay off highest interest bearing loans first
- Make sure there is some “fun” money
- Start an emergency fund, for unforeseen circumstances
Keep track of your spending
Keep a little book handy and write down everything you spend, credit card, cash, cheque, debit orders, etc. and keep your budget up to date.
Credit Card and other Debt
Make a list of all your debts under the following headings:
|Debts||balance in a/c||interest rate||good/bad debt|
|Credit Card A|
|Credit Card B, etc|
|Money borrowed from friends, family, other|
Even if you have to hunt to get all the information, do it, you will find that it is well worth the effort.
Good Debts, Bad Debts
Good debts are usually fixed term and relates to an appreciating asset, like student loans, house loans, car loans. Bad debts are e.g. credit cards and store cards. In the list above, indicate whether it is a good or a bad debt.
Reduce highest interest rates first
Check the list of bad debts for the highest interest rates and start paying them off first, pay the minimum on the others. You will see quicker results this way.
E.g. If the store cards charge higher rates than the credit cards, use your credit card to reduce the balance on the store cards. Please use your own good judgement of how much and how many to pay.
If you want to buy something, check whether it is essential or not. If you can’t afford it, don’t buy it. Rather look for cheaper alternatives if you have to have it.
Get another income
Find alternate ways to get an income by
- Selling unused items
- Find a second job
- Get family involved in reducing spending, saving money and adding to income
….see below for some products and ideas to augment your income.
To get out of debt, you may need to consolidate your debts by taking out a loan to cover them all, and then paying off the one debt only. This would help especially of the interest rates are lower than the others. It may give you a bit of leeway to get your plan and act together. It may also get you deeper into the ‘dwang’, so be very careful with this option.
If you get a bonus, tax refund, or other once-off payment, rather reduce your debts with it and/or create a cushion with an emergency fund.
Having a GOOD Plan to Get Out Of Debt will improve your health and relationships
Getting out of Debt will help
- Relieve stress because you won’t have to juggle payments any more
- Reduce worry and sleepless nights rolling around thinking of ways to get out of it
- Improve finances
- Regain control of your life
- Improve family relationships because you will have some breathing space and a cushion for those unsuspected mishaps.
In a country where people don’t save, the gap gets bigger and bigger between the have’s and the have nots.
It is our responsibility to our fellow man to value, save and invest money.