This is a famous saying by Ogden Nash, “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” Yes, once you fall in the debt trap, there is no way back. The trick to escape from a debt trap….just don’t fall into the debt trap. How can you do this? Simply learn how to manage debt.
Managing debt is not difficult. All it takes is discipline, a little financial knowledge and the will to overcome and manage debt. IndianMoney.com believes that the dream of a developed India is possible, only when we achieve 100% financial literacy. Just leave a missed call on IndianMoney.com financial education helpline 02261816111 or just post a request on IndianMoney.com website.
The first step in debt management…. Know who and how much you owe. What does this mean? Simple, it’s just being self aware of your financial situation.
Be a smart borrower. Never borrow more than you can repay. This is when you hear your elders in all their wisdom saying, “Don’t live beyond your means.”
Follow this simple thumb rule:
Love shopping and the good life….tempted to blow all your money shopping? Go ahead….But use your debit card to shop. Now there’s a problem…..What if your bank account runs dry? Well….this is a wake-up call. Why shop when you don’t have the money? You’re tempted to take out that credit card, swipe it, buy whatever you want.
Credit card = Borrow now, pay later.
Yes…credit card charges you interest on the money you borrow, which can go as high as 2-3% a month. This is when you must remember the famous saying, “If you buy things you don’t need, soon you will have to sell things you need.” If you use the credit card, mindlessly shopping and buying things you don’t need, you will soon fall in the debt trap. You will be unable to repay the outstanding dues, on your credit card.
When should you use a credit card? Credit cards have a billing cycle + grace period, within which you have to repay the borrowed amount. Billing cycle is around 30 days. The grace period is around 10-15 days. You do not have to pay any interest, on the amount you borrow using the credit card, if you repay within billing cycle + grace period.
Remember: Shop using your credit card, only if you are confident of repaying the borrowed amount, within the billing cycle + grace period. If you fall behind in your repayments on credit card, your cibil score would go down. You will not be able to avail another loan, from any bank/financial institution.
See Also: Types Of Credit Cards
Availed too many loans and struggling with repayments? You have to consolidate all your debts. How to do this:
“Interest on debts grow without rain.” You may be tempted to invest money, instead of repaying your loans. You believe you can repay loans, with the returns on the investment. A very bad idea… There is no investment, which can give you higher returns, than the interest you pay on a high-cost loan. First, repay loans….then worry about investments.
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