Things you should know about Debt Management

Have you ever wondered how you get into debts?

Debt is something which, none of us would want to entertain in our lives. But sooner or later, we do get into debts and sometimes it takes years to clear it off. We all think that we have control over our money, but the fact is our mind is manipulated every moment towards spending money. Before you even realize it, you would have spent it on something unwanted. And the debts get added. If you follow a proper debt management plan, you will not only be able to clear your debts plus you will know to avoid getting into debts.

Debt Management

What is debt management?

First of all, you need to know what debt management is and how it can help you.List down the debts based on the interest rates. Start clearing off the ones with higher interest rates. If you find it difficult to clear off debts with the existing financial situation then you can look for debt management plans. There are various companies that offer debt management plans and you can choose based on your needs. The first essential thing to do is not falling into further new debts until you clear all the existing debts.

There are quite a few things that you need to know before you can plan on debt management.

The marketing strategy:

A research says that the turnover of media advertising industry was 207 billion U.S dollars in 2017, which is the result of you and other customers who fall as prey of the marketing strategy.

People in the fields of marketing, sales or advertising know it better to make you spend your money on the things which you might not need even. Call it the marketing strategy or your hopping mind which gets tempted to buy things – everything adds up to debts and tons of debts!

Installments add up to become debts!

You do all the research for a home, and finally found your dream home- a place of your choice with all the things as you wished, but wait for the cost of it is beyond your affordable limit. The cloud of disappointment surrounds you, and then a friendly salesperson comes and shows the path. He explains how the huge amount can be broken into small monthly installments to be paid in few years and it won’t pinch your budget as well. You might just notice the short-cut that leads to your dream home and not the debt that is going to be with you till you retire or may be longer. Meanwhile, you need to look for a way to save for retirement as well. A house or property out of your affordable limit will leave you with debts for a lifetime and make it difficult to plan your savings.

By knowing the debt management technique, you will be able to organize your finances well. You can avoid such scenarios by fixing a workable budget before you look for a house. This will also help you to evaluate your debts, clear it off and how you can progress towards a savings plan.

The comparison trap!

Why can’t I go for nice cars, big home etc. which other people have?

I can easily get those by paying small monthly installments over a period of months and years. But, what about savings? Others would have saved for it and bought, you might not know the details.

Don’t fall into the trap of comparing with others and end up buying something which you might regret for years. Paying 4 to 5 small instalments every month can seem like a burden in the long run. Especially, when there is a financial emergency, you are all stuck in debts and left with no money.

The savings strategy:

If you still want to buy things out of your affordable limit, then start saving for it. There are lots of ways in which you can get started with savings:

  • Start with saving in banks that offer better interest rates.
  • Look for ways to invest your money.

Create a short-term or long-term financial goal:

A short-term goal can be a down payment for a car. A long-term goal can be a down payment for your dream home. This will surely reduce your burden of debts. Once you have saved a good amount, the instalments may be paid off in a short span. You can even start saving once you clear your monthly instalments.

Summing up:

Getting into debts is very easy but getting out of it will take huge efforts and time. You need to manage your finance wisely or else you will end up in trouble. Through debt management, you will be able to learn to balance between your debts and savings.

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Ways to Get Out Of Debts

Panic-stricken faces, reluctance to spend even on essential commodities, high stress, and pressure levels, getting annoyed even at the slightest chance are not just signs of depression but also of a person in deep debts. Well, the way out of it very simple pay them all.

The happiness of a person paying the last instalment of his loan is equivalent to that of a person who has become a father. You feel your shoulders light and mind stress-free. Imagine what will be your state of mind when you have to get into another loan to manage an urgent need? This will be a nightmare and depressing experience. So if I tell you that, there is a way to get out of debts and continue to be the same for the rest of your life, won’t you be related?

Debt Management

Here are five ways to get out of debts

Plan your savings

 I start with the most sort after and preferred solution to get out of debts, savings plans. Well, this is the easiest way to get out of debts. Using your money from savings to spend on life events and emergencies instead of taking a chunk from your monthly paycheque. There are a lot of short term and long term investment plans available for you to scrutinize and embark on. Once you decide on the plan, decide on the savings and then proceed to save it on a monthly basis.

Discipline is very important when you start your savings plan, no matter what the amount allocated for the savings should not be used for any other purposes. The amount saved should be used only for your goal, when you can save from those savings to start the cycle again to earn better monetary benefits.

Record your mistakes

Nobody likes to time travel to visit the mistakes made in life. But I am not going to ask you to time travel but create a documentary about various financial mistakes you have made or make an entry into your diary whenever you make a mistake. This will help you in two ways:

  1. It will protect you in committing the same mistake twice.
  2. It can also be used to bail you out of precarious situations simply to help you in finding a way to get out of debt

Secondary income

The best way to increase your cash flow and to save more money is to create a source of secondary income. Choose your secondary income source based on your passion. For example, if you are passionate about writing, then you can choose content development, article writing as a secondary profession. Writing can be done from home and it will also quench your passion. It will also help you as a stress buster and when money starts to come in from the secondary income you can breathe a lot easier than you were before.

When you choose a secondary income source, make sure it is not stressful and laborious. You already have your primary job to get stressed and over work. So take a lot of care when you choose your secondary income source.

Invest your way to the top

A business needs assets to increase its valuation similarly a person needs investments to increase his standard of living. Right investment at the right time in the right place will yield you right results. The easiest way out of debts is climb the ladder of investments. Plan your investment mix correctly. Investments to aid you during your retirements should be the first and foremost investment you make.

DCA provides a lot of investments, 529 plan which are tax free can also be chosen to make investments. These may come to your aid when you need them to.

Battle against boredom

Study says people tend to spend more when you are bored. The best way to put it is

“An ideal mind is a devil’s workshop”

It is always better to keep yourself engaged in some activities. When you can be active by paying least amount of fees why not? You tend to splurge money when you a bored and you start to purchase something to kill time. For example, you may decide to purchase Xbox to kill time until your girl returns from work. Instea,d you can choose activities like jogging, badminton which are comparatively cheap to kill your time. You can enjoy the twin benefits of fitness and stress relief.

Summing up:

To live with or without a debt is in your hands. It is always better to live a life without any financial burden. This is life without a financial burden is not impossible but is possible with little planning and wise decisions. A decisions for life time after all we are not going to be working all our life, when we decide to hang our boots make sure you hang it with pride and without any regrets.

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There’s a Way Out of Even the Deepest Debt Crisis

Consumer debt is at an all-time high, and even though it could be argued that much of our economy is sustained by debt, that’s probably a scant comfort to you if you’re drowning in debt yourself. But there is a way out of even the deepest debt crisis. You may be able to get yourself out, or you might need to enlist some help. But as is the case with most recovery programs, you first have to recognize the problem.

Debt Crisis

You’re certainly not alone

One very common element among people who find themselves over their heads in debt is a tendency toward self-recrimination. They tend to feel that their “failure” is unique to them, and often the product of some moral or intellectual shortcoming. The facts belie that tendency, however, as the average American household debt is over $90,000 in debt, and that average includes households that are debt-free. If you remove the debt-free households from the equation, the average jumps to a staggering $130,922, of which $15,762 is from credit cards alone.

Why are so many people struggling under such a huge debt burden? A significant part of that leap can be attributed to the fact that inflation has far outpaced increases in individual income. While income since 2003 has increased by roughly 26%, the costs of food, housing, higher education, and especially healthcare have risen considerably more, with some more than doubling in the same time period. If you go back even further, to the early baby boom generation, the cost of the average house back then – the biggest single expenditure for most people – was less than the cost of the average automobile today. When you add in how aggressively debt is marketed, it should come as no surprise that individual debt has skyrocketed, not just for the few, but for the many. It’s not about morals; it is simple math.

So if you were feeling alone in your indebtedness, rest assured that you’re not. Millions of people in the US and elsewhere are in the same boat as you. But if you’re ready to disembark from that crowded boat, it’s going to take some determination and hard work.

Finding your way out

There are probably almost as many “expert” opinions on how to get yourself out of that credit hole as there are people who are deep in debt, but a few basic actions are essential in any viable process. Among them:

Get a clear picture of your indebtedness – Most people actually have a very unclear picture of their actual indebtedness. They are aware of the major items such as mortgage, car payment, and the like, but often fail to consider other monthly expenses when composing their debt analysis. Take into account every expenditure that you face on a monthly basis, even the most minor ones. If they amount to nearly as much as or more than your monthly income, you definitely have a debt problem. And if you don’t have at least enough money left over every month to cover unseen expenses such as car repairs or replacement of a major appliance, you might not be in a debt hole now, but you’re probably already digging a hole that you’ll fall into in the future.

Don’t incur additional “bad” debt – Obviously, the essential first step toward getting out of a credit hole is to put down the shovel and quit digging yourself deeper in. That means not using credit to make non-essential purchases, no matter how tempting they might be.

Recognize and make use of “good” debt – Not all debt is bad. Some kinds of debt, such as a mortgage, should be viewed as an investment in the future. If you have a significant amount of high-interest debt such as credit card balances or even an old mortgage that charges at high-interest rate, you could save a significant amount every month by consolidating those credit cards into a single loan at a lower interest rate and/or refinancing your mortgage to take advantage of historically low rates currently being offered by lenders.

Shop for the best credit deal – The credit market is very competitive right now, especially for people whose credit scores are good. Shop around to see what kinds of deals different lenders offer, especially on mortgage loans. And don’t forget to check out credit unions, which tend to offer better terms and interest rates than banks, as they are typically owned by and more favorable to their members, rather than corporations whose sole objective is maximizing profits.

But sometimes debt problems can seem overwhelming, and you may despair of ever being able to get yourself out of debt. That’s when you may need to turn to someone who can help you do just that.

When you need a helping hand

Sometimes, straightening out debt problems is simply beyond what most people can handle. The complexity of the process alone has probably contributed to as many debt crises as any other single factor. If you’re feeling overwhelmed by your debts, avoiding them is the absolute worst thing you can do. At that point (or hopefully, well before that point), you probably need to get some advice and assistance from someone who is a certified expert in resolving debt problems. A certified credit counselor can help you unravel all the complexities of your financial situation and advise you on ways to climb out of a debt hole.

You will want to ensure that the credit counselor or service is reputable, and not just in business to make as much as possible from their customers. Start by seeing whether the service is a member in good standing of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA), both of which impose strict ethical guidelines upon their members. Certified counselors can offer much more than assistance straightening out credit card debts, and most are even prepared to help you with student loan debts, which are rapidly becoming one of the highest categories of individual debt. The important thing is to seek out assistance as early as possible.

Recognizing that you have a debt problem and taking the right steps to resolving that problem can be both a logistical and emotional challenge. But the sooner you take steps – the right steps – to get back on track, the easier it will be, and the better the results will be. So don’t punish yourself. Just realize that you’re far from the only person who is in this situation, that the conditions that got you here are not all of your making, and that there is light at the end of the debt tunnel in which you find yourself.

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It Is Not Hard to Pay Off Your Student Loan Debt

Student Loan Debt

The day you graduate from your school is surely one of the rosy days in your life. It calls for celebration as getting a degree will open up a sea of opportunities to help you find your foothold in the job market. However, once the celebration is over, realization dawns upon you that there is a lumpy sum of student loan to pay off. As the payment could be dragged for a long time, most of the students feel restless when the ‘pay off’ period takes off. I had a comparatively small amount as student loan debt – only $15,000 – after my graduation. However, it demanded a lot of hard work, discipline and dedication from my end to clear the debts. If you make a wise decision and stick with your way of loan repayment planning, it won’t be hard for you to manage your loan even if it is more than what I had. Here are four simple steps for you to follow: You should have a clear hang of your student loan  I think you did not get into the details of student loan when you took it out. Now when the time comes for repayment, you need to revisit ins and outs of your student loan. Most of the students don’t find it important and opt for the minimum payment. I will suggest that you should get the idea about the lender, status of loan and balance of each of your loans if you have borrowed more than one. I do think that grace period – the time gap between you graduate from school and repayment period starts – will be fine to gather all these details. Make a repayment plan Without a plan in place, you will head nowhere. This is the most crucial part of loan repayment process. Every loan has a certain time period of pay off. You need to decide if it is possible to clear the debt within this time frame. I know it is really hard to figure this out when you are yet to land in a job or have just started. However, you need to be as pragmatic as possible. If you find it difficult to clear loan in time, there are options such as debt consolidation to facilitate payment. Get Organized All loans don’t attract same interest. Usually, private loans have more interest if compared with government loans. If you have multiple loans, you need to make a list of priorities about which ones should be cleared first. I will advise you to start with private loans.

More payment will be a good idea

If you can flex your financial muscle, pay more than minimum amount. This way, you will be able to reduce interest on the loan as a time of repayment will be shorter. What is more, you will get rid of financial slavery earlier. Whatever the situation is, getting at top of your loan status is most important. Having the right mindset is what will see you bid adieu to your debt burden. Failing to pay off student loan will give you a hearty slap of severe consequences. That is why, a strong frame of mind is most important to ease off and ultimately, shrug off the burden of your debt. Article contributed by, Tina Roth who is a personal finance blogger at PRO Finance Blog.]]>