Ability to make sound financial long term choices and self discipline, that’s all it takes to having a sound, successful debt management plan. One without the other is useless as you’ll never find your way out of that black hole of debt and find yourself continuously spending unnecessarily.
Scott Maxwell, Vice President of Wealth and Income Planning from Talis Advisors and a certified financial planner says “Paying off debts does no good if you still creating new debts”. “Cut out what isn’t worth you spending towards and stop multiplying the problem”.
Living on a fixed budget and chipping away at your debts is a lot harder than it sounds, how do people do it?
1. Ask yourself two questions.
“Do I really need it?” and, “why?” We will always answer a unsure yes when we ask ourselves the first question although the second one may be harder to justify. We all need a faster computer, bigger TV, fashionable cloths, fine dining or even a better car, but do we really need it right now? Are we spending because we want to or because we need to? You’ll find more often than not we’re spending because we want to. Understanding the difference between wanting something and needing something is the first step in being successful with your debt management plan.
2. Document and talk about your progress.
We all feel a natural need for that, pat on the back, every now and again. Undertaking a debt management plan can be made that little easier if you have someone you can share your stories, difficulties and successors with. Whether you decide to share all the information just with one person, or join a online forum with people doing the same, it makes things so much easier to be able to talk to people about rather than trying to do it in silence. One person does not have all the answers, so if you can share best practices with common minded people it will make your debt management plan that much easier of a journey.
3. Separate yourself from those credit cards.
You’d be surprised how much personal satisfaction you get from cutting up your credit cards. It’s a major milestone in admitting that you are really willing to work on your debt management plan and getting yourself out of the rut. But if that seems a little daunting then simply do something like take them out of your wallet and place them somewhere out of sight. As the old saying goes, ‘out of sight, out of mind’. The next time you’re at the shops and can’t buy that thing you want, because you’ve left your credit card at home, you’ll begin to understand you didn’t really need it to begin with. Remember, money not spent is money saved.
4. Pay off as much as you can.
When it comes to a debt management plan there should be no minimum to pay back. Making your regular repayments on your debts with the minimum amount payable will only mean you pay more interest in the long run and make the repayments feel like they will last forever. Paying off more than the minimum when repayments are due gets to closer to your goal of being debt free much faster.
5. Take a small break sometimes.
Whilst really concentrating on your debt management plan, for your own sanity you need to allow yourself the occasional splurge. If people did nothing but barely survive and pay their debts it could lead to a upsetting lifestyle. Allow yourself, maybe one per month, a small spend to keep yourself happy. This could be a nice meal in a restaurant or seeing a movie, whatever it is, allow yourself a small amount for recreational spending. Try making it at the end of the month, you’ll find the event means a lot more and you’ll always have something to look forward to.
Debt management will help your credit in the long run.
Having bad debt will make it very difficult, if not impossible for apply for future credits. When you enter into a formal debt management plan future credit will not be available until the debt management plan is closed off. Following the above tips will help you get there. The primary key is understanding how much you have to pay off, what you need to live and with any surplus from your incoming monies throwing as much as you can to bring that debt down as fast as possible. When the end of the journey finally comes, and all your debts have been paid off, you are able to start a fresh chapter with a blank canvas, and those future aspiration purchases, car, holiday or house are back within reach. You would have also survived debt and got out of it so have the knowledge how to avoid it from happening again.