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Tips on Proper Debt Management

While growing up, financial prudence was never a key lesson I learned. The main reason for this was that I did not know of any adult in my family that seemed to have it going for them money-wise. Auctions, car repossessions, and foreclosures were a common thing among my relatives. With this, family get-togethers would include a lot of complaining and sad talk about how money eludes our family name.


When I grew older and became more aware, it is when I realized that bad debt was eating us. None of the adults in the family were debt-free. Even worse was the fact that no one had a credit score that allowed them to get any viable financial help. I wanted to change this from an early age and I decided I would do that right. I started learning about debt and how to manage it, from using a secured loan calculator                to speaking with financial advisors. When I went to college, I majored in a finance course because of the interest I built up over time studying debt management. Here are some tips I learned on how to manage debt.


1. Borrow Only What You Can Pay

One of the worst mistakes you can make when it comes to borrowed money is borrowing money that you cannot pay back. I simply do it this way, if I am earning €1000 a month, I have no business borrowing €100,000 and promising to pay back in a year. I would be digging my own financial grave. Make the decision to only borrow money that you can comfortably repay without having to forego your most basic needs in life.


2. Never Borrow for Recurrent Expenditure

From an early stage in my life, I saw my parents and other family members repeatedly borrow money for their recurrent expenditure. By recurrent expenditure, I mean bills that come up every week, month, or year. Borrowing for such kind of expenditure more than once only means it will be a repetitive cycle that you will not get yourself out of. Have a budget that helps you track on your spending, more so the recurrent expenditure. Find ways to cut down on this budget and overall save more money.


3. Consult an Advisor Before Borrowing

Taking a loan is something that most of us in this current age find ourselves doing. The state of the economy and its limited resources are the main reasons for this. It is therefore important to embrace the fact that borrowed money could be the most viable way to get something done. It is worth it to identify a financial advisor with whom you can consult on matters finance. Such an advisor will help you gauge how you intend to use the money and how you can do that prudently. Additionally, this advisor will also help you come up with a repayment plan and provide tips on how to stick to it.


4. Make Partial Payments

A serious misgiving that I observed at home as I grew up, is the attempt by my family members to repay their loans at once. While it is a good idea to make a lump sum payment on any loan you owe, it is not wise to do so if that leaves you with no money at all. This instance will see you fall back into debt as you try to meet your other expenses.


Making partial payments is the way to go if you’re looking to clear a loan. All financial institutions will offer you a loan repayment period. Calculate how much you will need to repay in total and divide with the time allocated. Commit to making partial payments regularly. This move not only helps to reduce the loan balance but also helps improve your credit score.


Access to loan facilities is one of the main drivers of financial prosperity. Bad debt, however, is an Achilles that will haunt you for a lifetime. Commit to improving your financial state by following the tips I provided above on debt management.