I AM WRITE-DOWN WEDNESDAY!
Continuing the debt series……. Don't run up debts, except for the huge debt of love you owe each other (Romans 13:8).
Are you tired of working hard only to barely make ends meet each month? Do you get frustrated with never seeming to have sufficient funds to meet your needs? We've all made money mistakes at some point in our life, spending money that we don’t have on things we don’t need.
You can make your finances what you really want it to be. You have to take 100% RESPONSIBILITY for it. Can you imagine the SERENITY that comes from knowing you are not indebted to anybody and you are in control of your finances.
If you are at your wits end because you are in a small or huge debt and you don’t know how to get out, I should let you know that there is a WAY OUT. Tell yourself “I AM COMING OUT”.
SMART TIPS ON AVOIDING DEBTS:
1. Live within your means – Stop spending money you don’t have and start living within your means to accomplish your financial goals. You will have to work it out yourself. It takes practice, it takes discipline. Some people spend more than they earn (accumulating debt), while some spend all that they earn (saving nothing) and some save 10, 15 or even 20 percent or more. Know what you can and can’t control as regards your expenses.
2. Stop borrowing - Borrowing money is one of the main reasons why people don’t get out of debt. While they’re paying for an existing debt, they owe another. Don’t borrow to consume but to invest (Be sure the investment is worth it).
3. FIGURE out where you stand- Determine your Assets and Liabilities to know your net worth. Simply put, Asset is what puts money into your pocket and Liabilities is what takes money out of your pocket. Do a check on this to know the unnecessary things that have been taking money out of your pocket and kill it.
4. KNOW where your money is going - Print out your statement, check your credit cards. Break it down. It will clearly show you where your money is going and also help you to see your weaknesses. When you know where your money goes, you can find ways to spend less and save more.
5. BUDGET – please read the earlier discussion on SS page. In addition, if you don’t succeed on paper when you are budgeting you won’t succeed in reality. Ensure you have a favourable budget when planning. Don’t have a deficit budget from start. At most have a balanced budget(include savings) in it. Budgeting is scriptural (Luke 14:28)
6. SAVINGS – Please read the earlier discussions on SS page. Savings cannot be over emphasized. It is a scriptural principle. In the world’s financial system, we are told to save at least 10% of your income. You can always do more. Take a look at Joseph’s story in the bible, when he advised pharaoh to save at least 20% of the produce for every year during the years of surplus. Can you imagine what would have happened during famine if they didn’t save? The wise man saves for the future, while the foolish man spends whatever he gets (proverbs 21;20).
SMART TIPS ON DEBT REPAYMENT:
1. ASSESS the situation: This is very important when planning your debt repayment. Many people are not sure of the amount they are owing cause of so much accumulated debt. Look at every single type of debt (small or huge) you have down to the last kobo. Create a spreadsheet that lists the lender, balance, interest rate and monthly repayments. This will help you keep track what you owe in addition to keeping you organized.
2. KNOW the kind of debt you have: It’s critical to determine the kind of debt you have. There is Short term debt: Money you borrow and you plan paying back within a year e.g. personal loans, any other debt within a short maturity. Long term debt: This is an obligation that is more than a year e.g. mortgage loans, auto loans, student loans etc. Knowing the kind of debt you have will help you prioritize what to take care of first in your repayment plan. we also have secured & unsecured debt. Know what you are getting into.
3. Understand the TENURE & TERM of your loans: you need to know the terms of your loans when planning repayment so you are not taken by surprise. For example, there is a standard repayment plan for mortgage loans within 15yrs. The key terms you need to know are:
Current repayment plans
Late debt payments attract penalties. Ensure you understand the terms of the debt you are getting into.
4. CREATE a debt repayment plan: This might seem like a difficult task, but it’s your plan to kill those debts. It helps to take action to better your financial situation. You also need to look at your BUDGET. How much can you afford to set aside towards debt repayment each month? Can you afford to pay more than the minimum- may be a little more? Paying more than the minimum decreases your interest over time and helps you pay your debt faster.
5. PRIORITIZE your repayment: Start out by paying off high interest debt first. It will help lower your interest accrual and start paying down your principal balance. Credit card debt is another type you need to pay off quickly cause of the high interest rate associated with it.
6. INCREASE your repayment ability: Increase the amount you put towards the repayment. Look at your budget and find a way to cut back current spendings. Making small changes can have a big impact. Also focus on ways you can make more money like the servants in parable of talents. This will expedite the repayment process
7. Understand the REASON of going into debt: This is the most important aspect of debt repayment. You can have a perfect budget and great intentions, but if you don’t understand the why of your debt, you are bound to make that mistake again. Take charge of your finances and your spending habits to avoid falling into the debt trap in the future. Your money habits today determine your financial future. Be wise
Get started. Give yourself time to get through each of these tips and decide on when you want to completely pay off your debt. Decide and plan a date. Celebrate the repayment you have done and know that with each payment you are getting closer to debt freedom.
WE ALL CAN LIVE DEBT FREE! WE WILL SUCCEED.
Adeola Moluga Haruna
On a daily basis, we feature words of financial wisdom from different Smart Stewards members and sometimes from Guest Contributors. You'd be glad reading them. Enjoy!
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