Debt Management Tips To Eliminate / Get Relief From Stress Living
Eliminating debt from your life isn’t that hard. Debt management is all about, how you manage your money. It requires, simple calculation(s) with little common sense ( Ofcourse, common sense is not that common 🙂 ). You need to concentrate on increasing your income, decrease in interest amount you pay. You can add fuel to it by following some money saving tips
Below are some of the tips which can help you out in getting rid of your financial debt.
Firstly, say NO to new debt
Before you actually think about clearing your debt, you MUST say NO to any new debt. Don’t create or plan unnecessary debt till you get out of the existing one. You may need to sacrifice a couple of things. That’s fine. You are doing it for yourself. The more debt free you become, the more you feel relieved from debt stress.
Make it your priority to pay off high interest debts and outstanding amounts
Make a list of all your debts and outstanding bills. Arrange them from high interest rates to low interest rates. Start paying off the debts with high interest rates first. If you don’t have enough to pay your high interest rate debt, but have enough to pay low/medium interest rates, pay them right away. So that, you will start saving on “interest” amount, and your debt list starts decreasing. You will also start feeling better and relieved. Don’t hesitate to borrow from some other source on a lower interest to pay back the high interest rate debt. Don’t let your emotions change your decision to borrow again. After all, debt management is all about arranging the finances properly.
Think about future expenses
Think well in advance about your short term and long term expenses. You will then have a clear idea and get enough time to arrange the money with no interest/the lowest possible interest. Otherwise, you will be forced to borrow money for high interest in the last minute.
Think about another source of income
Start working on another source of income. If you can’t recollect immediately, think about your past what you have done for free. There are more chances you will find at least one. It may be teaching tuition, working on part time basis, being an advisor, etc. Everybody can do multiple jobs. It is all in your mindset. You can make it.
Make sure, your expenses < your income
You must always make sure that your average monthly expenditure is less than the average monthly income. Cut down all unnecessary and wasteful expenditure and preserve the money to pay high interest debts. At the end, you should have at least 30-40% margin between your income and expenses.
Draw up monthly budget
Every month, draw out a list of assets and liabilities and mark the high priority payments which are unavoidable, check if any balance is left over and prioritize another set of payable amount(s). This way, one may be able to see if any savings can be made, and clear the debt as much as possible.
When any purchase is made, remember to negotiate the price whenever possible. Some big super markets may have scope for discount sales, of which you should take advantage. Remember, a paisa saved is a paisa gained. Many times, an item or two could be available at discounted price based on the quantity, which is normally publicized in the local newspapers.
Think about free membership card
In many super markets, garment stores, shopping malls, etc. one can get free membership cards, some of which may either allow discounts/rebates or add up purchase values which can be redeemed for any useful gift. For example, when a purchase worth Rs.2000 is made every month at Reliance Fresh retail outlet, while using the free membership cards before paying the bill, some points would be earned. These points which may be equivalent to Rs.40-50 get added to the credit while paying through credit cards. One can just see a revolution in the bill payment process.
Try to maintain an emergency fund
It will be wise to have a separate corpus fund equivalent to six months’ average spending, just to be safe in the unlikely event of becoming jobless or non-receipt of salaries for the working period for some reason. This fund should be taken off one’s mind and it should never be touched unless in case of any emergency.
Two Savings Accounts in Two different Banks
It will be advisable to have two savings accounts, one in a public sector bank and the other in a private sector bank with sufficient balance so that if any problem with one bank is encountered, the other bank account could be operated to meet the dire needs. Generally, people have more than two savings accounts besides holding credit cards, so that they do not have to face any problem if there is a constraint in operating one of the accounts.
Last but not least, read good books on money management
Better start reading some business magazines and newspapers. There will be lots of queries asked by other people and a lot of opportunities available outside. You never know, 3 rupees business newspaper or 10 rupees business magazine may give you an insight to earn thousands. Of course, you can always use the library instead of indulging yourself in NEW EXPENSES :).
You might start with “Rich Dad, Poor Dad” and read it a number of times, whenever possible. This can give you enough confidence to manage your finances.