How to Control and Manage Debt
Whether you are starting out in entrepreneurship or have an established business, you may sometimes find that you owe other people money. No matter how big or small the debt is, you need to learn how to control and manage it. If you do not, you will find that you are struggling to pay the debt and the situation can get out of hand.
Learning how to manage your debt is the watershed between success and failure. We will explore in detail some time-tested methods of controlling and managing debt.
List down What and Who You Owe
It is important that you are very clear about your financial situation with regard to debt. Make a list clearly detailing what you owe. Every time you make a change, for instance, if you make a payment, update the same on the list so that you can see the kind of progress you’re making.
There are some great online tools that allow you to track your finances, and you do not have to be an accountant to use them.
Calculate the cost of the debt
There are some debts that are very costly to have. That loan that the bank is so quick to advance to you may very high-interest rates. Be clear about the repayment because the longer you pay the more you pay. If you realize that it is very costly for you to have the loan for a long time, you may want to consider looking for lump sums to offset it quickly.
Have a Budget
We cannot belabor this point enough. A budget will help you plan your money because you’re working off an amount that actually exists. Stick to your budget and if you have any extra money, avoid the urge to go on a shopping spree, and instead pay off one more debt.
Schedule Your Payments
Make a schedule for your payments and stick to it. For instance, if the credit card bills are due by the 5th of every month, then set your phone or calendar to remind you to make the payments.
A big mistake is to postpone making payments to a later date because this will add to the debt burden for the next payment.
Understand Your Priorities
There are some debts that you have to prioritize otherwise you could find yourself in the red. For instance, if you’re a business startup and are still trying to build a core team, delaying salaries may not be a good idea. But, you can negotiate with your insurance company to stagger the premium payments.
Within your debt list, prioritize but do not put off payments indefinitely because you do not want to fall behind.
Have a Repayment Strategy
You have two basic options when it comes to paying your debts. You can pay off the larger debts or start with small debts first and get them out of the way and concentrate on the larger ones. However, this does not mean that to you disregard the larger debts.
Have an Emergency Fund in Place
Emergencies can occur at any time, and having an emergency fund will sort you out during this time. As an entrepreneur or a business startup, always put something aside in your emergency fund to buffer you in case of an emergency.
Be Honest About Your Situation
Sometimes the debts may overwhelm you and you have the option of posing some of the payments. For instance, some insurance covers actually give you a grace period of about 3 months to help you recover financially. During this pause period, you do not incur any additional costs. This is why it is very important that you read the terms and conditions very carefully, so that you are aware of the options that are available to you if you find yourself in financial dire straits.
Think About the Debt before Incurring It
Do not get excited about free money. Credit cards are attractive but they can become a burden. Learn to operate without one, and if you really have to have it, keep it at a minimum and only use it when absolutely necessary.
Consider Your Income Vs the Debts You Have
The simplest way of looking at this is, living within your means. Your income should never be less than your debt portfolio. You can cut out some items from your daily expenditure and transfer the money to the debt. For instance, cut down the trips to the restaurants and salon parlors and channel that money to your debts.
Avoid Getting Into More Debt
Try and live a simple life. Some of the debts we incur are totally unnecessary and arise out of our desire for luxury lifestyles. If you cut done on your expenses, you can save more and in this way, you will have money when you need it instead of borrowing.
Seek Financial Advice
There is no shame in getting help when you need it. Think about it this way, if you can go to a PR practitioner to help with your personal branding, then why can’t you go to a financial expert to help with your financial needs?
If you find that you are unable to manage with the money you have, please seek help from experts who will teach you how to manage your resources.
Learning how to manage and control your debt is not rocket science. Have a budget, prioritize your expenditure, and most importantly live within your means.
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Your Personal Branding Coach… Hannah M. Githuki