Alright, let’s talk about basic personal (and business) finance. Let’s talk about debt.
How should you handle debt? One clear of don’ts is: taking out your credit card just to buy a new set of TV, or getting a car loan for that Italian or German supercar, all when you’re under heavy debts! In other words, discipline is required here.
Now, here are three things you should do in handling debts (and later, 3 things you should not do, other than getting a car loan).
- Make a monthly payment calendar – In short, create a schedule on how you’ll pay your debt. Make a budget (we’ll cover this in #2), set aside what you can for the payments – and simply pay them. But most important of all, be faithful or committed to the payment schedule and amount.
- Create a monthly budget – Whether you have debt or not, you should already have a monthly budget. A monthly budget tells you how much money you earn, you spend and you keep. When you’re in debt, having a monthly budget will show you how much you can set aside for debt payments. Try to set aside as much as you can for debt payments; if you can cut expenses, do so and downsize. Keep in mind these are all temporary. Once you paid your debts, you can resume to your normal expenses and lifestyle.
- Consult with a bankruptcy lawyer – When your debts balloon to monstrous amounts, it’s time to consider about bankruptcy. But relax, you’re not about to file for bankruptcy, yet. You just want to consider it in case things really go bad – and the first two tips can’t help anymore. Have a bankruptcy lawyer to consult with. Ask him/her about your situation, what you can do and should do. Above all, be honest with your lawyer, or else, he/she can’t effectively help you.
Now, these are the things you shouldn’t do:
- Taking on more debts – This is one-way ticket to your financial downward spiral. Don’t take any more debts. The exception is “debt consolidation”, where you take a new loan to pay the old ones. However, this isn’t necessary when you’re just starting out. Maximize all resources you have first when you pay your debts before thinking of getting a new loan. Debt consolidation should be your last resort.
- Spending money on stuffs you don’t need – No TV, no new phone, no supercar, no beautiful house on a beachside. Please, if you’re under debt, pay them first before buying these stuffs – should your debts ballooned to higher amounts, you risk losing these stuffs, anyway.
- Hesitating to ask for help – don’t hesitate to ask for help. It only make matters worse. Think about this: if you only ask for help earlier, things would probably not go worse as where you are today.
That sums up our topic about debt management. Keep in mind this is not about bankruptcy yet. But if your debts are beyond the “normal” range, it’s time to consult a bankruptcy lawyer and have him/her help you with the matter.