The day has been too hectic for me shooting 3 episodes of FS 101 and shooting 4 episodes of PATV
Teleradio after that I basically did not have enough time to write something for all of you.
Today let me cheat a little, I have chosen to highlight one of the articles I have seen in one of the blogs that I
have checked and I think this will be helpful to most of the readers.
Debt is very much like quicksand - easy to stumble into and once you are in
it, very difficult to get out again. In fact the more you struggle, the more you
start to sink.
Fear not because here are the simplest and easiest three-step approach to
clearing debt, you can soon begin enjoying a debt-free lifestyle again.
Next Step – Grow Your Wealth
Once you have paid off your debts, the next step is to use your new financial management skills to begin growing your wealth and ensuring
that you never get into debt again.
So, I hope that you enjoyed reading these tips, although it is not originally mine, I should say I agree with the writer and I think we can
consider it too.
Hanggang bukas muli,
Step One – Understand Your Current Situation
Before you begin to solve a problem, you need to fully analyze and understand it. Imagine you have set off on a weekend away in the
country. However on the way to your hotel you end up getting lost. You have a map, but before you can re-plan your route you need to find out
where you are.
The same principle applies with your debts. It is very difficult to plan how you are going to get out of debt, until you understand these key
- How much debt do you have?
- What sort of debt is it - loan, credit card, mortgage?
- Are you spending more than you earn?
- What is the value of your assets (savings, investments, cars, home, etc)?
The best way to get a picture of your financial situation is to create a budget, where you can work
out your spending & earnings and record in one place the value of your assets and the value of your debts.
Step Three – Monitor and Control Your Debt-Free Strategy
The final step is to implement your Debt-Free Strategy and keep in control of it. It could take two or three years before you have cleared all
your debts and you will need a good level of self-discipline to ensure you stick to the strategy.
Your budget is your key tool for monitoring and controlling your debt repayments and you should get in the habit of updating it and monitoring
your spending at least once a month.
Step Two – Create Your Debt-Free Strategy
The strategy is simply a plan for clearing your debts. With the budget completed, you now know where you are, you know that you want to
achieve a debt-free lifestyle and now you just need to plan how you get there.
How you create your strategy is really determined by your own debt situation, but there are some common themes that apply to many
- Spending more that you earn – this is often the biggest cause of debt and should be one of the first items that you address in your
strategy. Look for ways to cut your monthly expenses, so that you are spending less than you earn –it does not hurt to cut back and
use the extra cash to reduce you debts.
- Pay off expensive debts first – Money borrowed on credit cards and store cards tends to come with much higher interest rates than
bank loans. Try to prioritize your debt payments so that you pay off as much of the expensive debts as possible.
- Use savings to clear debts – People often have money held in savings, whilst owing large debts. The problem with this is that the
money earned from interest from a savings account is generally much lower than that owed on a debt. It is better to use your savings
to either clear or reduce the amount you owe.
Your Debt-Free Strategy does not need to be complicated and could just be a one-page document covering the following items:
The goal that you are trying to achieve (to become debt-free) and a realistic date for when you want to achieve this by
- A list of your debts, including the value of each debt
- Priority assessment of which debts need to be cleared first (e.g. your credit card is likely to be higher priority than your student loan)
- How much money you are going to repay on each debt every month
- Any savings or investments that you can cash in and repay against one of your priority debts
- Any assets that you can sell to raise additional money to help clear debts (e.g. trading down to a cheaper car or items around the
house that could be sold)
- Any activities that you can undertake to reduce your monthly expenses, so that you are spending within your means, resulting in extra
cash to help clear debts
- A timeline to show when you expect to implement all these activities