Peaceful Life Free of Debt
Having debts is giving you a headache? No need to worry much, most people have had that kind of headache. But living peacefully free of debts is not just a dream, provided we know very well and manage our financial capability.
Debts have become a routine part of most people’s financial life. Nearly everyone on this planet is having a debt, whether of small sum or of huge sum for enterprise capital. Not to say the aggressive offer to purchase needs via credit system. Who doesn’t want to get his own car or house through this credit system?
One type of debt most people, especially women, just can’t resist, is credit card. Wow, having this one “magic card” benefits various facilities. In large sale season, when not enough money left in our bank account, credit card enables us to make purchases at will, provided the expense is within the limit specified. But this is the very thing that leads us into the trap of debt’s “devil’s circle”. A moment’s desire might incur considerable impact in all aspects of our lives.
This complicated problem is very possible to come, even more when prices keep going up while we still have to fulfill our needs and also to pay our routine installment. So, who doesn’t want to have a steady, prime financial condition? One reasonable solution to take care of our financial problems is to stop having new debts. We must believe that by getting wiser in managing our finance, it is very likely in future we will have peaceful life free of debts and surely it is something that makes us happy.
After knowing the effects of debts to financial life, it is only natural we then are eager to free ourselves from that burden immediately. But afterwards we don’t have to keep away from debt of any kind. It is allright to have debts provided we specify its purpose, know the exact sum to borrow and most important, we ascertain the source of fund to pay them off.
Types of Debt
If you want to manage your financial life correctly, you’d better make out what type of debt you are in. there are two kinds of debt: good and bad. It is bad if used for consumtive needs, which value will be imposed to depreciation. It is good debt ig it could produce an asset, for example: for purchasing a house on credit.
Debt Checking
How do we look into the amount and condition of the debts we are in? is the amount still in the normal level or has it already exceeded the limit? Each debt owed to a financial institute is always put into a written memorandum of agreement stating the states of payment and bills. If we borrow from a non-financial institution, see that you get a letter of agreement or make carefull note on the amount, period of installment and its due time. Also make a simple balance note showing your credit in the left column and your debit in the right column.
When the total of installments in one month has exceeded 30% of our monthly income, it means we have borrowed too many. And if the rasio of our credit and the short-term debt (debt which due time is under 3 years period) as already three times bigger than the short-term debt, it proves our financial life not healthy. If so, we must review our expenses.
Dealing with Debts
The easiest way us by not having more debt. By controlling ourselves to stop having debt of any kind, we have taken correct step. Then we set up a systematic schedule to pay off the remaining debts. If needs be, try to negociate some of them into rearranging the due time and the sum of installment. It might help lightening the burden of our financial capability.
Or we may directly ask the creditor for lightening the payment stipulation. If the creditor is our own parents, family or close friend, this may not be too difficult to do. We can frankly tell them the true condition of our finance. But we must manage never to loose their trust to us. Fulfill any promise we have made. Initially they likely will decide not to give us more loan. Any how this will favourably discourage us not to have more debt.
Things will be different if the creditor is a financial institute. Here we may offer more collateral or ask for restructuring the debt into longer period. We may also propose a temporary suspension of payment in compensation of increased sum of installment taking effect after the suspension period ends.
Paying Off Debts
After calculating and classifying systematically the amount of our debts, then we can proceed to the drastic step of paying them off. This one solution will relief us a lot. Asking for less amount or postponement of payment just won’t release us from our debts.
In planning to pay off the debts, we must see how much exactly our asset is. It is enough to pay off all the debts? Don’t be too hasty and don’t push yourself. We must anticipate our financial future in longer range. If we pay all the debts off only to be compelled afterwards to borrow again to cover our cost of living, then we just come back to square one!
For employees, soft loan families or the use of KTA (non-collateral Credit) may offer some more solution. But both options are temporary. Then the ratio of the asset and the monthly payment must be checked continually.
After knowing the effects of debts to financial life, it is only natural we then are eager to free ourselves from that burden immediately. But afterwards we don’t have to keep away from debt of any kind. It is allright to have debts provided we specify its purpose, know the exact sum to borrow, and most important we ascertain the source of fund to pay them off.
