Debt is an unpleasant thing to experience in life. Many people get credit and don’t know how to manage their finances, leaving them to accrue debt over their lifetime and remaining on the back foot when it comes to managing their finances. There are ways to leverage credit that will relieve any credit stresses or pressures that you have. If you are suffering from a mountain of debt that is giving you added pressure and pain, then now is the time to make a change for the better in 2016. Positive Lending Solutions have provided five ways you can help yourself get out of debt.
Admit that you have a debt problem.
If you struggle to get ahead financially and always seem to be paying bills, you need to admit that you have a cash management problem and that you potentially have a debt problem. Many people that get themselves into debt make themselves the victims by justifying expenses that they cannot afford. Too often, they believe that having more money would solve their debt problem, or justify having more repayments, or they are negligent and ignore the fact that debt is even a problem. If this sounds like you or someone that you know, it is time to face the problem head-on, choose to do something about it and commit to making a change in 2016.
Learn how to manage your cash flow.
Debt management is ultimately about your own cash flow. The more you understand and know how to manage this, the more control you will have with your own life’s situation. If you have never managed cash flow before, an easy way to learn more would be to understand the cashflow quadrant that was made famous by author Robert Kiyosaki, who published the book Rich Dad, Poor Dad. To get to grips with cash flow management, you can even play the game Cashflow 101, which helps you to identify and manage cash flow for your lifestyle. You can see a video from Robert Kiyosaki about the game below.
Ultimately, it is about creating a positive cash flow. If you are currently facing a mountain of debt, the situation will be more challenging, but it isn’t impossible to fix. You need to ensure that during each time period (whether that is a week, fortnight, month, quarter or annually) you are earning more after expenses (your net income) so your cash flow is positive. If your cash flow is negative, then you will be sinking deeper into debt.
To improve your situation, make a list of all your income streams from your job, business and investments. Also make a list of all of your expenses such as credit card repayments, loans and mortgage. Once you have listed these, total both to see if you are currently cash flow positive or negative. Also identify the largest expenditure areas to see how those costs can be minimised, as well as identify any new ways to improve your income.
Consolidate your credit.
If you are borrowing from several lending institutions, it may be better for you to consolidate your debt into one credit facility so you can better manage your overall debt. Furthermore, you may be able to reduce the interest rate that you were paying, lowering your monthly repayments.
Resist impulse buys on your credit card.
Managing your spending habits will go a long way towards reducing your debt situation. Many people fall into debt by spending the money they don't have. Worse, once they spend that money, there isn’t a strategy to repay the money that has been lent, since the money from this credit facility is usually unsecured. For example, much of the impulse buys may be clothing, accessories and jewellery. While some may hold some value over the long-term, ultimately, these are forms of depreciating assets and will place the purchaser of these goods into more debt.
Debt is an unpleasant issue to face in the New Year. Commit to making a change for the better and transition yourself to having a positive cash flow that will make you debt free in 2016.
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