Life after debt can be very messy particularly if the funds obtained went towards a deal that turned sour or simply didn’t bring in the expected return. Here are some tips that could help ease such a situation…
A – ASSESS your financial situation
What exactly do you need to pay off? Is it a bank loan? What’s the current balance and what’s the interest needed to be paid thereof? Is there anyone else you owe? Family? Friends? Write down all the amounts including obligations that you need to meet each month.
On a seperate sheet, write down your sources of income. This could be salary from your job, income from your business or assets from which you can make money. Note that an asset need not necessarily be property but also a skill or talent you could sell.
Such an assessment will give you a clear a picture of what you owe, your exact earnings and help you prioritize and / or reorganize your debt repayments.
B – BUDGET! BUDGET! BUDGET!
A budget is a TOOL that helps you plan your money. The idea is to live within your means i.e. ones income should never at any point exceed spending. Many articles on money recommend budgeting as an essential tool in managing finances. Consider the following excerpt from The Good Book:
“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’ Luke 14:28-30
I decided to give this tool a try after hearing repeatedly about it. I was pretty desperate at the time. It was a matter of life and debt;o) I adopted a 10-30-60 proposal which suggests 10% goes to giving, 30% to savings (an emergency fund, short/mid term investments and retirement), and the 60% remainder to meeting monthly expenses. My goal for the first year of budgeting was to get out of debt and therefore ‘spent’ more than I saved. Life has eased now but I still keep a 15-month MS Excel budget.
C – CHECK
For a budget to be effective, one needs to make a habit of going back every so often and checking it against actual spending. Checking helps you see where your money is going. By so doing, you will also be able to identify overruns and or, miraculously, areas of potential savings. These ‘miracle’ savings can be put towards paying ‘Paul’.
Keeping track of a budget may at times be discouraging particularly if you seem to be way off target. Remember nothing is cast on stone. The idea is to keep at it so that one day you can kiss debt goodbye. And as much as possible, keep your budget simple; details can be very onerous.
Finally, do check how ‘others’ manage their money. There’s lots of value in the experience of others and even more in letting them check on you. I hope to share my thoughts on accountability sometimes but for now, a zillion thanks for reading. Keep checking;o)