Controlling Debt

Managing Your Debt

Controlling Debt

12th May 2007

Ever wonder how some people just always seem to have money to do everything under the sun? When I was going through my bad debt predicament, my freind Ted spoke many wise words to me. Ted is an economist and financial analyst. He's well on his way to being a multi millionaire and he makes very interesting comments during our discussions around money matters. He once said to me, the cure to bad debt is learning some basic money management skills. I'm going to share with you the lessons I learned from the conversation.

Managing Your Debt

Lesson 1:

Stop spending. Once you're stuck in a whole, do you keep digging deeper or do you stop and look for ways to get out the whole? We are so used to spending money without thinking twice and we soon find that to be our demise. Stop buying things you don't need and get a grip on your spending.

Lesson 2:

Don't borrow to pay for expenses because in essence you are creating more debt for yourself. If you are in over your head with debt will getting a debt consolidation loan make sense? You get money on credit to service debt but the credit you've acquired is another debt. Do not use your credit card to pay for your debt if you are already not able to manage your current debt. Save your good credit profile for a real emergency. We need to get rid of this habit of getting loans to service other loans because for most people you end up in a cycle where you get loan upon loan and that spirals your debt out of control.

Lesson 3:

Before you borrow money, save money. Put aside money you earn in a savings account or in an investment that gives reasonable return on the money you save. This way should you consider taking a loan, you can then either add your own cash to whatever it is you need to finance and thus borrow a smaller loan. The benefit of borrowing a smaller loan is that you have a smaller repayment and you can negotiate a low interest rate.

Lesson 4:

Analyze your options before you start paying off your debt. Will it be better to pay off the high interest debt first or is it better to clear off the smaller balances which can be paid off in full and then you are cleared. These are the types of questions to answer when calculating your debt reduction and pay off.

Lesson 5:

Paying minimum on your debts may seem manageable in the beginning but in the long term it certainly is not advisable. When you have extra cash pay extra especially on credit card debt and try to make it a habbit to pay more than the minimum required. It helps you settle your debts faster.

These are take home lessons that I really hope you will apply and start paying off all your debts. Advice not followed is of no use.

"A wise man should have money in his head, but not in his heart." - Jonathan Swift

Comments (9):

Michelle Says: The hardest thing to do is control debt. I'm trying my best to stop spending | 05.12.2007 |

Vic Says: You can't live without spending but what is it you spend on makes the difference | 05.12.2007 |

Brian Says: You should spend wisely I think this how controlling debt starts and the post is trying to teach that exactly so Michelle maybe look at what you are spending on and cut back on the non necessities | 05.12.2007 |

Alan Says: Paying the bearest minimum amount is a trap if you ask me, the interest kills you and you end up spending way more than needed | 05.12.2007 |

Clayton Says: Lesson 3 is actually not easy because we have easy access to credit cards even before we start earning a stable income | 05.12.2007 |

Ashley Says: I have never been a big fan of giving credit cards to students | 05.12.2007 |

Matt Says: Lesson 2 is my take home lesson from all this. Consolidation loans have their advantages but when all is said and done it's still a debt | 05.12.2007 |

Stuart Says: Very good lessons. Thanks for the "heads-up" to debt pay off | 05.12.2007 |

Doug Says: Debt is manageable but what gets most of us is the human nature of spending more than we can actually afford. I think this is a very relevant topic thanks for it | 05.12.2007 |

MoneyBusiness

Money & Finance

Categories

Blogs I Read

Sponsored Link

Managing Your Debt