Effective debt Management

Jagjit Singh

Due to the spread of consumerism all around and overpowering of wants over needs, human being has become a slave of the debt trap. Nowadays, it is very difficult to find a person who is not servicing any loan. In fact many people take a loan just to repay another existing loan.


If that so, then how can somebody dream of a ‘debt free life’ So if we accept debt as part of our day-to-day life [which although is not good], then we have to find effective ways to manage our debt such that it does not ruin our life. There are numerous instances where a Borrower had taken extreme step of ending his/her life.

This is how dangerous a debt trap can be for human being. Do you know that the biggest roadblock which restricts most people to achieve financial independence is the vicious cycle of “debt”? Knowingly or unknowingly many people falls into ‘debt trap’ and once they are there, it is very difficult to come out of it.

Nowadays, it is quite customary that we often borrow money to fulfil many of our daily needs as well as wants. When the time is good, or I may say till the time servicing of loan(s) is well within one’s control, no issue, the real problem starts when one is forced to borrow money just to pay-off or service another loan. This is where the call for effective debt management comes into force to avoid falling into the dangerous debt trap.

Thus it is important for any human being to deal with this problem head-on. Though it is easier said than done, but let us attempt to make sincere efforts in order to devise some workable strategies to manage your debt effectively. Believe me, it is possible to get out of the debt quickly, but it requires commitment and discipline on your part.

You can as well reduce your debts quickly by taking the following simple but effective steps: (1) Spend less – practice cost containment: This is the most effective and powerful tool in one’s armoury. Sometimes there is no gimmick, no strategy and no pain-free formula for getting out of debt.

The answer is a “change in lifestyle”. Work more, Spend less. It may not be enjoyable, but the reward can last a lifetime. There are many ways through which one can identify the unwanted expenses which can be cut.

Remember, every penny saved is an extra income for you, which again can be used to reduce your overall debt exposure. \(2) Find ways to earn more: Making more money is probably one of the most progressive options. When you think about making more, it indicates a progressive and positive approach on your part.

Consider a part-time job as a way of getting out of debt. Set the goal of eliminating your current debts, and drop the second job when you reach the goal. Sometimes additional income is the only practical way to get back to zero.

(3) Make yourself worth more: The “spend-less-or-makemore” formula doesn’t address everyone’s problem. What if your regular job is a dead end?

You can see that your salary won’t rise that much over time, but your needs will. What then? Obviously a short-term, parttime job won’t solve the problem. Consider making yourself worth more.

Every job has a market value. If yours is low, why not train to do something that pays better? Consider getting the training necessary to land a better-paying job. Education may be the single biggest step you ever take to improve your financial situation.

(4) Avoid the menace of plastic money: How do you start eliminating your credit-card debt? If you are in deep creditcard debt because you cannot control the impulse to use the cards unwisely, then pay cash whenever you can or, better yet, save up for a purchase and pay by check when you have saved the full amount. With an interest-bearing account, you will actually make a small amount of money in the interim period.

(5) Learn to prepare your budget: The leap from getting out of debt to staying out of debt usually starts with a budget. There is no substitute for a sound balanced budget when it comes to managing money.

At the same time there seems to be a natural resistance to doing it. “Why budget?” you may say. A realistic manageable budget is the first step toward accumulating a positive net worth. The previous steps help you get out of debt, but budgeting helps you take the next step i.e. staying out of debt.

(6) Opt for Loan Restructuring: There are instances where some time in the past, you took a loan where the interest rate is very high. With change in market conditions, the prevailing interest rates on loans are far lower than the one applied on your existing loan.

Under his scenario, you must approach your lender to restructure the loan i.e. by sanctioning another loan at lower rate to pay-off the old loan.

If your lending is not considering your proposal then you can approach any other bank to get a loan at lower and pay-off the loan with high interest rate. These are some of the effective and simple steps to manage your effectively. So implement these strategies and live peacefully. Cheers!!!!

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