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.
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.
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.