Ever imagined what it would be like have to live a debt-free life, to have better control over your lifestyle choice, to be able save and invest more? Ever thought about a time when you’ll wake up knowing you have no outstanding payment to clear and no pesky creditor to worry about? Does the picture in your head look exciting but dreamy?
Here’s how you can make it a reality and maximise the true power of money.
Review your current debts
Using a spreadsheet or budgeting tool, take stock of all your financial records and accounts, including your credit cards and banks loans and use online tools to get an idea of what your repayments could be.
Review your expenses
If you’re going to cut clear your debts, you’ll also need to put your current spending pattern under the microscope, and focus on spending less than and paying back more.
Prioritize repayments
All debts are not the same, and some can get you into trouble or a financial mess if you don’t sort them out quickly. For example, you risk losing your home if you don’t pay your mortgage, and you could be jailed if you don’t pay your tax. But if you default on your store card debts, you only stand to lose your money or possessions.
Pay on time
Some debts will accumulate further if you miss a payment, default completely, or surpass your overdraft or credit card limit. The consequence for default is usually a higher interest rate and a penalty.
These fees can add up so quickly, so you should try to avoid them by all means. A good tip is to automate your repayment by arranging with your bank for direct debit at regular periods of the month. This will help you avoid paying extra debts for defaulting by making sure your account is funded to be debited for repayment on time.
However, if some emergency or other genuine reasons, you might be unable to meet up with your repayment schedule, it is important you quickly get in touch with your lender to explain the situation.
If you’re upfront with them with the difficulties you’re facing, they might be lenient enough to reschedule your repayment plan to a more convenient period for you or offer you other opportunities in minimising your monthly repayment rates.
Ignore the temptation to borrow more
For example, block out or cut up anything that entices you to want to take out more loans, such as your store card and credit cards.
If there’s a credit card account that’s been docile for some time, avoid the temptations for loans by taking a step further to close the accounts. You can also inform your credit card company to cut down on your credit limits.