When someone needs money, they can fulfil it from their income. But what if- Their income is low and can’t fulfil all their needs. Then there comes a thought of taking debts.
Debts are something that is an inhuman tradition from years. Our ancestors have developed the process of taking debts. However- They always use to take very less amount of money from others. Due to less debt, they were able to easily manage and return that money in time.
But- As our world is growing towards modernization, demands are increasing at rapid rate. People are becoming fond of using luxurious vehicles and modernized gadgets that cost very high. An average middle-class man can’t afford these things from their regular income. They have to take loans from banks or any other financial company.
When people get a loan, they take it as easy money. They aren’t afraid of taking debts from different sectors. They use money and forget the reality that they have to return the money to the owner & that is where the whole debt recovery process can get exhausting.
The thought of returning the money to the creditor comes in mind when people spend all the cash they have. They don’t have any money to clear the debt. Due to this- Some people compelled themselves to take the dangerous step of doing suicide and some time- The money lender file a case in court due to which person may be sent to the jail as a punishment of not returning the money. Not only this- The creditor takes all the property of the person.
That’s why we should develop the habit of managing our debts more wisely. We should always try to return the borrowed money as soon as we can.
Here- In this article, we are going to learn the best ways to manage our debts in the best possible way.
First, let’s learn about the types of debts. Generally- there are 2 types of debts. They are:-
If the money you take from the creditor is to invest in assets like a business, share market or any other sector that can generate profit and give good return over time, Then it is called good debt.
When someone takes good debt, He already has a plan about what to do with the money burrowed. He invests it in such a way, he can easily generate income and return the money from that income.
If the money you take from the creditor is to invest in liabilities like day to day expenses, buying groceries, cars, bikes or any other thing that is not going to give any return but increases the expenses is considered as bad Debt.
Bad debt is what takes people down to the road. There is no proper reason behind the money being borrowed. These type of people takes loans and make a pile of money that is needed to be returned. But- Unfortunately, they spend all money and finally, they can’t give the money back to Creditor. This ruins their life.
7 Ways To Manage Debts Easily
1. Comparison Of Earning Vs Expenses
This is one of the most important things to be considered while taking any loans. We should analyse our income. This gives the idea if we can pay back the creditors money. If we have less income- Then we should try to avoid taking debts. Similarly- We should focus on our expenses also. We should try to reduce our expenses. We shouldn’t spend money on the things that aren’t are needed much. Reducing expenses and increasing income can help to pay off the debts.
2. Build Assets Not Liabilities
This is the technique everybody should use while taking loans. We should make proper planning about what to do with the money we borrow from the creditor. This technique tells us that- We should buy the things that generate Income(Assets) not that things which increase our expenses (Liabilities). The income and profit we get from assets can help us to pay off the debt. Example of assets is:- Business, Real estate, Stocks and Examples of liabilities are:- Cars, Bike, Clothes etc.
3. Take Benefits Of Leverages
This is also a great advantage that you can get while taking loans from Banks.
We can get leverages in certain things like real estate. What happens here is:- when we want to buy a house and we only have half of the money that is required. Then- We can take loans from banks. Banks gives remaining half money at a very low-interest rate. We can buy a house and generate income by giving it in rental service. The money we earn from rent can help us to clear our debt.
4. Pay As Soon As You Have Money
This is also another great rule one can follow to get rid of debts easily. Generally- What people do is- When they got money, they spend it on other things rather than paying to debts thinking that they will pay the debts next time. This is a bad habit. If we don’t pay the debt in time- The interest goes on increasing and we will not be able to pay the money back. Therefore, we should give money to our creditor as soon as we have no matter how small the amount it is.
5. Make Payment Calendar
Making and following the payment calendar helps us to remember the due date of payments. When we become able to return the money in time, different fees will not be charged over us. This could save a lot of money and we can clear our debt easily.
6. Make Decision To Pay Which Debt First
We should make a clear vision on which debt should be paid first. We should analyse all the debts we have to pay back. Then, whenever we got money, we should pay the debt that has a high-interest rate. This can save a lot of money that we need to pay for interest.
7. Use Debt Managing Apps
The modern world is digital. Here, we can get different digital software and apps that we can use to manage our debts. These apps remind us that we have to pay the debt by giving notification. That’s why we should take the benefits of these type of apps. Some of the best apps to manage our debts are -Vertex42, Undebt.it., Unbury.me, Tally etc.
These are the same proven techniques that you can use to manage your debt more scientifically and easily. There are some companies like DG institute that helps people to manage their debt.
Thus- From the article, it is clear that debt isn’t something that takes us to trouble but the way of managing is something that determines if we will be able to pay out debt back or not. Developing assets with loan money can make you rich.
So, Next time- When you took debt then make proper planning for the Investment of that money.