All over the world, people are struggling with debt payment mainly due to lack of a debt management plan. Most borrowers go for a loan without a plan on how to pay it back.
For example, college students are now and then applying for loans to help settle their school fees, but they forget they will one day pay back the loan.
I would like to remind all the borrowers that the solution to a debt is paying it back.
Why do people borrow?
During hard economic times, people are forced to borrow in order to finance their business or settle their bills. In ensuring that one manages his or her debt during such turf times, it is essential that one avoid borrowing for consumption purposes. The reason is that such expenses bring no return, and paying back a loan together with its interest may make one feel much strain.
Additionally, many take loans because they have a constant source of income, making them be in a state called comfortable debt. However, these people forget that one might lose the source of income, thus making it impossible for them to settle the business loan, car loan, or mortgage.
How can they manage these debts?
I do not want the readers to take that I discourage them from borrowing, as my point is that people need to improve on their debt management skills.
One way is through budget creation, whereby one controls his or her debt instead of the other way.
In order to budget, one has to understand how much money comes in a month or a year, which will help in making a decision on how much to borrow.
Another brilliant way to managing one debt is through cutting back on non-essential spending. After budgeting, one is able to determine his or her disposable income. Upon realizing that it is not enough to secure your debts, it is crucial to reduce non-essential spending to save extra money each month or year.
I encourage those reading the article to share with their friends on social media to encourage them into improving on their debt management skills. Everyone has to understand that they will retire at some point and the more they accumulate their debts the more difficult it will be to pay college education, make investments, or take a vacation.
People need to know that their future depends on the type of investment they are making in the present and if debt is their main investment then their future holds many uncertainties.
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GUIDE: reducing credit card debt
- Dave Ramsey s Complete Guide to Money The Handbook of Financial Peace University
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