There are a few simple steps that can help you to manage your finance and stay out of debt. Being in debt is common now but you will need to have a proper plan to make sure you do not fall into a debt trap. Ideally, it is up to you and your finance management plans as to whether you will be able to stay away from it.
- To start with, you must not ignore the impact unmanageable debts can have on your finance and your health. Admitting that you have debts and have to repay it as your legal responsibility will enable you to stay on your track and make proper plans for repayment.
- Next, you must focus on creating a proper budget for your household expenses. For this you can take help of the several budget tools that are available in the internet. A proper budget will enable you to know about your income and all your expenses, both the necessary and unnecessary ones.
- Next, identify all the unnecessary expenses and strike them off. This will reduce your monthly expenses and help you to save some money to pay off your debts.
- Follow this [process by making a proper plan to pay off your existing debts immediately. Prioritize all your debts first according to the rate of interest each carries starting with those debts that have high interest rates. Pay more than the minimum amount due on these debts to have them cleared fast.
- Do not ignore the other debts while you pay the high interest ones. Make sure that you pay the minimum amount of each so that you can avoid the penal charges for non-payment. If you pay less than the minimum amount it will result in piling up of the debt eventually.
All these easy steps will not force you to go for debt settlement finding it to be the most feasible option after going through several debt settlement reviews.
Consider balance transfer
If you are in a situation where you have to make a choice between debt settlement and consolidation, you can consider balance transfer as a third useful option especially if you are dealing with your high interest credit card debts. You can take over most of the debt with one particular debt this way but there are a few tricks to know and follow to make your effort worthy enough.
- Choosing the rate of interest is the most important thing for balance transfer. You will be better off if you choose a zero interest balance transfer.
- However, you will need to make sure that you have adequate resources to pay off the entire debt before the balance transfer expires.
You will need to make strategic planning during balance transfer to manage your finance to make sure that you do not fall into a deeper debt hole. One of the best ways to manage your finance is to limit the use of credit cards and even better stop using them completely.
When you use it make sure that you pay the debt as soon as possible even before receiving the monthly bill. Also make sure that you make most of the purchases in cash so that you can limit your expenses.
Strategic management of debt
You can manage your finance and deb only when you have and follow a strategic finance management plan. It all starts with cutting your cost and starting saving. Managing debt and finance needs diligence as well to ensure that it does not ruin your financial health.
- For this you will need to first know your debts. All debts are not wrong or bad provided you keep these within your manageable limits. In fact, if you consider the present situation of the economy you can even create wealth with debt because it is largely dependent on deficit financing.
- The most important thing for debt and finance management is to build your financial health as well as keep it steady. For this you will have to assess your debts and cash inflow and outflow to control your household expenses.
- You must make sure that you take on debt that will appreciate in value in the future. These are ideally considered as good debts such as when you take out a loan to buy a house. Since the value of the house will increase with time, this debt will help you to create wealth in the future.
- You must also maintain a financial discipline that will give you financial as well as mental strength. This will also help you to have an adequate sum of money at your disposal in the times of emergencies.
In addition to these you will need to be well prepared and make sure that you never overlook debts when it starts to become incontrollable. There are specific signs that will indicate such vulnerable debts which if you know will help you to take the necessary remedial measures immediately.
- The most significant sign is when you find it difficult to arrange the money needed for the repayment of your debt every month.
- Apart from that, when you realize that the money for repayment is more than the cash flow you should consider it to be a sign of unmanageable debts.
- Moreover, when the value of the asset falls below the loan amount it is also a bad sign for your debt.
- Lastly, when you see that some of your debt amount is left unpaid every month, consider yourself close to the debt trap.
In such situations, you will first need to consider your means for debt payment and proper management. It is your financial ability that will matter more rather than your ability to borrow. Also know all your resources to repay your debt so that you do not need to consolidate or settle your debts. As a rule of thumb you must make a budget of 40% for housing and divide the rest equally between all you living expenses and saving. This will ensure that you will have a strong financial strength even if you have debts.