For a lot of us, maintaining financial buoyancy is easier said than done. The battle to stay in the green can seem like a losing one most of the time. We live in a society where debt has become part of our lives; we borrow to make purchases, to fund businesses, to pay tuition and everything in between.
Debt is not necessarily a bad thing. It only becomes harmful when we fail to manage our obligations efficiently. Today we will look into a few of the most common debt issues and how to overcome them.
Financial Knowledge
The vast majority of Australians get into debt trouble because we fail to understand a fundamental aspect of borrowing.
We borrow for all the wrong reasons and get stuck with bad deals. A general rule of thumb would be to borrow to create wealth. The reality is that most of us borrow to fund luxuries and purchase items that lose value and so do not create anything in return.
Make valuable purchases, never buy a car unless that car will make you money in return and “pay for itself”. The same principle should go for most other items.
Unsustainable Borrowing
A lot of students leaving college graduate with unsustainable student debt; they have to begin this new phase of their life with thousands of dollars owed to banks. When students leave college, they quickly get into more debt by borrowing for a car, starting a family too early and spending on frivolities.
The vast majority of us get into more debt without having a concrete plan on how to service our current obligations.
Bad Spending Habits
Debt is not the real problem; it is a symptom of the real issue, overindulgence and poor self-control. A lot of us get into crippling debt as a result of over-indulgence on unimportant things. We fail to identify the things that are important or necessary.
We make purchases, take trips, have more kids, buy homes all without doing any financial planning and review.
Too much too soon
Nowadays, financial institutions are going out of their way to give us credit. A lot of us sign up for these programs that seem to be giving us “free money” without actually needing the money.
The fact that we have four credit cards does not mean that we should max them all out on unnecessary purchases.
Now that we have gone over a few problems, it is time to look into a couple of solutions.
Learn
A lot of us get into financial woes simply because we have little or no financial knowledge. It is important to read books and attend events that enable us to make better business decisions.
This will be the cheapest and most straightforward way to begin our journey to overcoming debt.
Make a financial plan
Most people with debt issues do a poor job with regards to financial planning. To succeed financially, it is essential to develop and follow a system of fiscal discipline and continuously work on improving our system.
We can develop plans with the help of professional advice from a financial planner for income management, debt elimination, emergency spending, and most importantly creating multiple sources of income.
A financial plan is needed if we want to attain economic sustainability.
Discipline
The process of becoming debt-free will not be easy. We will come across obstacles that will make us want to quit, and stumbling blocks will await us at every single turn. We need to be disciplined to stay the course and see it out.
We can also get loans for new purchases even if you have a bad credit history or you are still recovering from previous debt.
