Thursday, 4 November, 2010

Tips to Be Debt Free

Tips to Be Debt Free

Author of this guest post: Ryan Smith, a writer associated with Debt Consolidation Care Community ( He has written several articles for various financial websites. He is considered to be an expert in the Debt industry and has made significant contribution through his various articles. The article has been edited for brevity, language and relevance for the Indian audience by Mr. N.
In today's fast paced life everyone is running after money. Being financially strong is the ultimate aim of all of us. However many of us face a financial crisis for at various times. And seek the help of a loan to tide over the crisis. The real problem arises when they are unable to pay their debts in time. And the dream to become debt free starts - whether from the clutches of the moneylender or the "friendly" banker. Primary reason for getting stuck: imbalance in income and expenses. Now the question arises - How can I become debt free again? Some tips:
1. Keep a balanced monthly budget: Often, we don't realize the serious consequences of not clearing their debts within time. And continue to "spend-as-usual" with our typical monthly expenses. As a result we miss deadlines for repayment. Keeping a balanced monthly budget is vital to pay off debts in time. During indebtedness one should avoid making unnecessary expenses. And continue with the newly acquired good habit even after becoming debt-free.
2. Take help from debt negotiation services: Nowadays, debt negotiation services have become very popular, due to their value addition in the best possible debt negotiations. Help can be taken from such service providers to become debt free. These companies negotiate with banks and money lenders of the client and persuade them to reduce rates of interest on a loan, restructure the debt repayment period, etc. Debt negotiation companies are held in high esteem in the United States and many European countries, and are increasingly becoming popular even in Asian nations, including India.
3. Save & invest wisely: A rupee saved is a rupee earned. Saved pennies act as a shield against getting caught in debts. The money thus saved - after meeting your routine budget of monthly expenses ought to be invested wisely. Depending on factors such as age, risk profile, etc., you should invest such savings in an appropriate option such as fixed deposits, mutual funds and shares. Obviously, before choosing the option, one should understand the risk and reward of the chosen mode of investment clearly.
Summary: Spending and saving money wisely enables a person to become and remain debt free. Any loans should be for a genuine purpose and an acute financial crisis. Taking loans for unnecessary or trivial expenses is like inviting unwanted tension into one's life.
Additional thoughts of Mr. N:
  • Understand the difference between good debt and bad debt. A loan taken that generates "net income" or creates an "Asset" that eventually will either generate income or save expenses is a "Good Loan". Anything else is a "Bad Loan"
  • Maintain accounts. If you don't, it makes no sense whether or not you have a budget. After all, you can't monitor the budget without accounts.
  • As the saying goes, "When you are stuck in a hole, stop digging" - Make sure that you don't go even deeper into debt.
  • Beware of credit cards. They can be knives in the hands of a surgeon or in the hands of a murderer.

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