The Most Authentic Guide on Personal Finance and Investments

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Trap the debt before it traps you!!

The dress we bought on credit card is probably already worn out and discarded, while we are still struggling with the bill. The foreign junket is history, but the debt continues to haunt us for months to come.

Is it all really worth it? Think about it!!

Taking debt to finance our ever-increasing desires and aspirations, has turned into a one big nightmare. This has not only affected our financial health, but badly hurt our personal lives too. Therefore, it would be wise to take appropriate steps before the lender seizes our car or house; before we have to face any public embarrassment; before the problem becomes too serious.

Step 1 - No new debt
To start with, no new debt - PLEASE! No more purchases on credit. If you have the cash – buy; else simply forget it. Debt is like a cancer. First stop it from spreading. Only then you can take further steps to eliminate it completely.

Step 2 - Work out a repayment strategy
Credit card and personal loans are usually the most expensive. Therefore, they should be the first to go. Moreover, these loans are not very large and one can manage to pay them off pretty quickly. Vehicle loans could be the next target and then the loans against investments. Thereafter, you can look at repaying loans from your friends and relatives.

Repaying housing loans could come at the end as one needs a place to stay and the alternative i.e. renting would also mean some cash-outflow.

Step 3 - Get serious with the budgets
Don't think that living within one's means is down-market. It is nothing to be ashamed of. Don't think life is all about showing-off to your neighbors & colleagues. That's all media hype created by the banks and the product manufacturers to trap you. Therefore, be proud and flaunt your budgeted lifestyle.

Use all your ingenuity to cut costs. This will save you some money to start paying off the debts. And as your debts go down so will your interest costs and month after month you will be pleasantly surprised at the amount of cash you have in hand.

Step 4 - Take your lenders into confidence
Have an honest dialogue with your lenders. Seek additional time for repayment, seek lower interest rates; seek refinance; seek relaxation in other terms & conditions - every little bit will be a big help.

No lender likes a defaulter on his books. If the problem is genuine and if the solution is workable, there's no reason why your lender won't accommodate you.

Step 5 - Take professional help
Of course, it is difficult to cut down on the standard of living. It is a big dent on one's ego. Therefore, one may need a psychologist to talk us into it.

A financial advisor may help you to with your budgets - to judiciously manage the incomes & expenses; investments - to earn better returns from your assets; and debts - to suitably restructure them.

A career adviser may help you with some part-time assignment.

No doubt becoming debt-free is going to be tough ride. But it is a short-term pain to long term peace and prosperity (To cure any disease, we have to suffer the pain). We owe it to our family and children. The earlier we start the better it is.

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Ignorance is like a SIGNED BLANK CHEQUE... anyone can MISUSE it.

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