Do u have too much debt? + Effective debt management

I was talking to a fren of mine; on one afternoon; hearing ourselves complaining on monthly installments and how her credit card bills are mountaineering high. Actually our sighs of lows didn't surprise me at all knowing that its a common fad nowadays to have people like us btwn age range 25-30-s having such heavyload shoulders to pay at each end of the month ... oops...


To be honest; with the rise of goods of inflation. nothing is cheap these days. call it living with style - its almost as if we gotta spend so much more to be in touch with the current fashion or fad or whatever. 

If u notice; teenagers; students and the younger working generation - all seems to chase to grasp on the latest store item. Notice the latest ads on the newest magazine editions... call it Louis Vutton, Prada, Gucci, Coach, Miu Miu, bla bla bla..  seems like they're all the latest things to be MUST HAVES in most of their closets. Where do they find the money to spend? Relying on plain salaries are just not enough to have them all? 



As fashion changes; so does the arrivals of new styles; seems like the Credit cards stand in line to be their fashion savor. Was it worth the buy to end up thousands of debts? or was it a collective of hasty purchases that somehow is killing em slowly? Sadly.. they dont realise its not only their credit pocket they're burning - its causing long term damage - financial wise. 


Here's a word for all Credit card borrowers out there... an article of Beware of the Warning Signs of Too Much Debt and How to Tell if You’re in Over Your Head--- 


By Jeremy Vohwinkle, About.com Guide
Do you have debt that is bogging you down and keeping you from reaching your financial goals? Using credit and debt can be a powerful tool that allows you to buy a home, a vehicle, send children to college, and even provide leverage for other purchases, but when you accumulate too much debt, it can pose a serious problem.


Keeping up with your debt payments is only part of the problem. Just because you can afford to fit these payments into your budget, you’re still putting added strain on your finances. Money that is used towards paying down debt can’t be used elsewhere. That means if you’re spending money each month on credit card or other unnecessary debt, you’re taking money away from other areas of your budget that can be used to build wealth and plan for the future.

It can be difficult to actually realize when you’ve reached a critical point with your debt situation, but there are some warning signs that can help you identify the problem before it becomes too serious to address. 


Here are a series of statements to compare to your situation. If any of these apply to you, it is time to stop  and take action to remedy the problem.


10 Warning Signs of too Much Debt

1. You don’t have any savings.
2. You only make the minimum payment on your credit cards each month.
3. You continue to make more purchases on your credit cards while trying to pay it off.
4. You have at least one credit card that is near, at, or over the credit limit.
5. You are occasionally late in making payments on bills, credit cards, or other expenses.
6. You don’t even know how much total debt you actually have.
7. You use cash advances from your credit cards to pay other bills.
8. You bounce checks or overdraw your bank accounts.
9. You’ve been denied credit.
10. You lie to friends or family about your spending and debt.

 Take Action Now

Sometimes we know deep down inside that we have a debt problem, but it is easier to deny the problem  than to address it. It can be painful and require hard work, but the sooner you realize that you are  in over your head, you can begin to make positive changes. Delaying changes to your habits will only  prolong the problem and make it worse. If you don’t think you can tackle the problem alone, there are  people out there willing to help.


“Creditors have better memories than Debtors”, Benjamin Franklin once said. How true! We cannot just ignore or forget about our debt as it will never disappear for as long as it remains unpaid. Therefore, the path towards a Debt-Free life would be to manage our debts wisely. 

Below are 7 Highly Effective Ways of Debt Management:

1. Control the use of Credit Cards

The golden rule in using Credit Cards: “Treat them like Cash!” If you don’t have the cash NOW to purchase something, don’t even think about taking the credit card out of your wallet! Using the credit card in such circumstances is essentially spending future income which may not be payable in full later. And this is the start of getting ourselves straight into the Debt-Trap.  If you don’t trust yourself, then don’t bother having one or if you already have a few, cut them up before they cut into your bank account!

2. Know where your money is flowing

If you can’t track it, you can’t manage it! Develop a habit of recording all your expenses for the month. You may write it down in the “555 Pocket Book” or the PDA (for the tech savvy people). It is also a good practice to keep receipts.  Add up your expenses and assess if you have overspent, by comparing it to your income. Analyze those items that are taking the most money out of your pocket and see if you can do anything about them. You’d be surprised how much you’re spending on those cigarettes, movies and “branded coffee”! The main thing is to never spend more than you make! 


3. Minimize the “Nice-to-Haves”

One of the reasons people fall into the Debt-Trap is they don’t know how to distinguish between the “Need-to-Haves” and “Nice-to-Haves”. Food, clothing, home, life and health insurance and the like are Needs. You don’t need a pack of cigarettes a day. You don’t need a RM10 cup of coffee a day. You don’t need to wear branded clothes all the time. You may not even need satellite TV or that 42” Plasma/ LCD TV. Go through your spending record and identify items that can be cut.  Sacrifices have to be made and the larger the debt or the smaller the income, the bigger the sacrifice.


4. Create a Budget

No country runs without a budget; neither should you. One of the most effective ways of managing our debts wisely is through proper budgeting. A budget gives us a “preview” of our financial position so that we can roughly estimate whether we would have a surplus or deficit. If our budget already shows a deficit, drastic actions have to be taken – you could either increase your income or cut out the “Nice-to-Haves”. In any case, a Budget is actually a Spending Plan that allows you to spend on areas that matters the most to you whilst ensuring that you don’t overspend.


5. Look for Cheaper Alternatives

Revisit your monthly budget and see if you can use any other cheaper alternatives for the necessary items. For example, toothpaste – can we switch to brands which give better value for money? Check its net weight and decide on purchasing the brand that gives you the same value for a lower price. Sometimes, cheaper may not always be better. What we should be looking out for is Value-for-Money. Is it cheaper and faster to take the public transport instead of driving? Is it better to shop for Christmas gifts much earlier, like during the Mega Sale instead of waiting till year-end? Think of creative ways of cutting your expenses and yet maintaining your quality of life. This can be fun too! Get your family involved by asking them to suggest and reward the person with the best idea. 


6. Stay away from Temptations

As the saying goes, “Out of Sight, Out of Mind.” Many times when we go shopping for our groceries, we end up buying things that are not on our shopping list. This phenomenon is worse when we have kids around us. They tend to throw in a candy or a toy into the shopping cart and before we know it, we have spent more than we budgeted for. Parents are partly to be blamed as they too can be tempted to buy things that they do not need. Unable to resist the magnetic pull of products on discount, ice-cream, potato chips and that pair of sandals on offer get “drawn” into their shopping cart! And we  can always justify our actions by rationalizing that “It’s on OFFER!” or “I’ll not buy anymore sandals for the rest of the year!” but… we’d know better! So, stick to your shopping list and keep everything else out of sight! 


7. Remember to Reward Yourself 

“All work and no play makes Jack a dull boy,” so goes the saying. Managing our debt and getting out of it is hard but it doesn’t have to be painful. Once in a while, you should reward yourself by buying yourself a well-deserved gift or treating yourself to a good hearty meal. By rewarding ourselves, we’d feel motivated to stay on track. You can actually organize a potluck at your place instead of going out to eat and amaze your friends with your culinary expertise. Have picnics with your family and think of creative games or activities that you can do as a family.  Make this whole exercise as fun as possible and after a while, you will come to realize that a lot of the best things in life are free.

There you have it – the 7 Highly Effective Ways of managing your debts wisely! We have to bear in mind that if we do not manage our debts wisely, they will manage us in return and it can be painful. The Road to Managing Your Debt Wisely would be a smoother one if we try not to think of all these as a sacrifice, but as delayed gratification.

Remember: “Our actions today can determine our destiny tomorrow.” Let’s “Make Prudent Financial Management A Way of Life” today!


Sources http://www.akpk.org.my/Articles/OTHERARTICLES/THEROADTOMANAGINGYOURDEBTWISELY/tabid/171/Default.aspx