How do people get into debt?

Posted by admin
on August 26, 2014

Debt is a common problem that many people face nowadays. Have you ever wondered why and how people get into debt? These are the top few reasons:

1. Reduced Income: When people are in their comfort zones and are faced with a sudden reduced income, failure to adjust expectations and spending accordingly will inevitably lead to debt.

2. Divorce: For many, divorce is not jus a separation of two people and their family but also a very costly thing to go through. Other than the cost of hiring a lawyer, a divorce can be a messy one where one party would demand too much monetarily. Divorce settlements can lead to debt.

3. Poor Financial Management: Needless to say, failure to budget your spending will lead to debt. Having a monthly budget and knowing how much you can or cannot spend is crucial to managing your finances.

4. Gambling: This is a rampant problem. Gambling can be the cause of debt and it can also be the effect of debt. Whatever it is, it will be a vicious cycle and should never be made a habit.

5. Medical Burdens: This can happen suddenly without warning. An accident or a sudden chronic medical condition may require a huge sum of money that you do not have. It is always good to have backup plans and money for rainy days so that you do not fall into debt from a sudden medical burden.

Now that you know about some of the reasons why and how people get into debt, you can start thinking about how to prevent this from happening to you. Debt is never fun and it can ruin your quality of life and even relationships. Do not let yourself become a victim of your own inability to manage your finances.

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Managing Debt

Posted by admin
on August 16, 2014

Debt can be a real hassle. Here, we have identified some tips that may help you better manage your debt:

1) Draw up a table that reflects your monthly salary and expenses. This will act as your budget sheet. List everything that is chalked up in your expenses and you will then be able to clearly see what your spending patterns are like and where you can spend lesser. This may seem daunting at first but once you make it a habit, it will come naturally and can really be a great help in budgeting and managing your financial situation better.

2) Generally, it is advised that your monthly debt commitment should not exceed 35% of your gross salary every month. However, if you are already struggling to pay your debts, make sure you make it a point to go below 35%.

3) The best way to manage debt is to as much as possible pay off your instalments on time. This may sound like a no brainer but failing to do so will mean you chalk up even more debts when you incur late charges.

4) Perhaps your budgeting is working and you realise that you do have a little more to spare now, try to increase your regular payments or pay more in a lump sum if you can. This will help you clear your debts more quickly. However, always check the terms and conditions if you cannot keep this up longterm.

5) A good way to manage debt is to clear the debt that charges the highest interest first.

We hope you find the above tips useful! Good luck!

 

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