Are you trapped in debt? And how would you like to get of of debt? I reckon you have wondered how you sank so deep into debt? You are not alone.
There are millions of people living in debt who wonder if they will ever get out of it. Debt can become a burden too heavy for us to carry.
Good debt versus bad debt
You incur good debt by taking a loan to invest or add value to your business ventures or some other capital project. This kind of investment should pay back the loan and get you a notable improvement in value (return on investments). Other good debt ventures include student loans and mortgages.
Bad debts on the other hand, are loans taken only to improve your standard of living and finance new lifestyles. They do not add any value to your life. These loans are mainly used to acquire items that are not a ‘must have’ in life. Credit cards are also considered as bad debts because they charge exorbitant interest rates. They also encourage impulse buying and overspending.
Good debts should be acquired carefully while bad debts should be avoided at all costs.
Why is debt bad?
It can sometimes become difficult to pay back the money we borrowed. This in turn can lead to consequences such as:
- Losing property through auction: Non-payment of debt can result to loss of personal items and property through auction. This is a very painful process as it leaves a person empty handed.
- Stress that may take toll on your health: Over-thinking about debt and the threats from debtors can result to sickness. It may at times lead a irreversible health condition such as stroke, high blood pressure, migraine and acute ulcers. It can also lead to sleepless nights and hence fatigue which in turn makes one counterproductive.
- Family break ups: Financial constraints can lead to strained family relationships between married couples or siblings.
- Loss of social status: When debts take toil of our lives, we may lose our friends and other people may look at us like failures in life.
Is financial freedom a pipe dream?
If you are burdened by huge financial debts, you have only one respite: Go find ways to get yourself out of debt. Period. Accept that it is a huge problem and then resolve to turn your life around.
The good news is that a person can adopt some hard strategies to get out of debt. Below are a simple guide to get you started paying off your debt;
- Keep a record of all your debts: It is important to know how much debt you have so as to devise a good repayment plan. It is also paramount to know how much interest and penalties each debt is attracting.
- Pay the debt off as quickly as possible: Make your debt payment a priority. Pay debts as scheduled or go an extra mile of paying larger amounts for faster clearance.
- Devise methods of clearing all your debts. If the burden becomes unbearable, you may request for help from friends and relatives. You can also sell off some items or properties so as to clear your outstanding debts.
- Avoid credit cards: Credit cards are tempting. They make one spend money that they do not have. The interest rates and penalties charged are high. Credit cards can make someone sink into unnecessary debts.
- Check your lifestyle: Consider reducing your expenses as much as possible. Use the extra cash for clearing your debts. Live within your means as extravagance can worsen your debt position. Identify any loophole that your money may be sinking into. You can look for ways of cutting down on your expenses. For example, you can choose to cook food instead of buying from fast foods. You can also choose to use public transport instead of driving your own car. Always spend less than you earn.
- Bad company: Some people live in competition with each other. They are always aiming at outdoing one another. This in turn leads to over-spending so as to ‘fit in’. Keep off from such company as this is can make your debt position worse.
- Increase your income: There many ways of making money. Identify ways of increasing your income. There also countless ways of making money online. You can also look around for passive investments. Look for side ‘hustles’ to supplement your current income. Identify the ones you are most comfortable with and let them work to your advantage of being debt free.
- Avoid borrowing before clearing off with the current debts. Piling of debts can be very frustrating. It can also be very expensive because of the interest rates charged on each debt. Also avoid taking loans to buy items that are not important or necessary.
- Pay your bills promptly. Some bills attract penalties if not paid in time. Such penalties prolong the payment period. They also cause a lot of stress and increase your financial burden.
- Keep money aside for emergencies. Put some money aside so that in case of an emergency, you may not resort to borrowing to meet your need. Most of the unforeseen emergencies include health related and death issues. Ensure that you have an insurance cover for them.
- Never borrow money to start a business. This is because businesses take long to pick up pace. Your new business may also collapse in its initial stages, leaving you in huge debts. Save and have a good plan for a new business. Before setting a business, ensure that you have done enough research about it to avoid losing your hard earned cash.
Are you really working hard enough to get out of debt? Getting out of debt is not easy but with discipline and determination, it is achievable. Devise a good plan and follow it to the end. Read and research widely on how to have a healthy financial life. Focus on being debt free. It is important to understand how you ended up in debt so as to avoid a repeat of the same mistake.
Plan your finances well and live on a budget. Get out of debt and enjoy your life should be everyone’s priority.