9 tips to manage debt better
By: Rajiv Mehta
Tags: Credit Cards, Financial Planning, Personal Finance, Loans, Debt

Managing debt is one the key aspect of financial planning. In this article we will talk about debt, why do people take debt and some debt management tips.

What is debt?

Debt is money you owe to another person, entity or financial institutions. You borrow debt to meet personal requirements. This transaction comprises of two parties one called as borrower (Debtor) and other as is termed as lender (creditor).

Debt is considered to be as amount to be paid later and it may be in a single or a series of payments. Debt might be owned by government, companies of even individuals.

The main components of debt are principal amount, time and rate of interest that holds significant importance for borrowers.

All individual and even corporate bodies grapple with this four letter word Debt for which everyone has to repay more in addition to the borrowed amount. Debt is often required to meet our short or long term requirements or during times of personal crisis. In this article we will talk about the various debt management tips.

Importance of Debt Management

Every person has to manage debt at one of the other point of time. It is prudent to make timely and correct payments to lenders to avoid further charges and penalties and one might have to make some personal adjustments to balance finances and cash in hand. Most relevant terms in debt transaction are rate of interest, repayment period and its applicable terms and collateral if required.

Debt is owned by individuals in common requirement like building a home or buying a car. The most common form of debt comes in the form of credit cards that is used most frequently for meeting our day to day needs and also because of convenience to make payments to various merchants.

Why do people take debt

Debt is also a powerful product as it significantly enhances one’s purchasing power and in most developed nations it is used for making all payments as spending cash is considered more expensive. Debt in the form of credit card also allows individuals to manage finance better for short term and one also earns interest by investing funds available in bank accounts.

Related: Credit Card and Debt

How to break the vicious circle of Debt?

Ideally one should take debt only in extreme situations and the focus should be on making timely payments to lenders. It is also seen that debtors take up part time professional work to manage and end debt at the earliest.

DEATH SPIRAL

- The most common problem with debt in personal finance space is that millennial have lesser income and spend more piling up credit debt and have lesser income hence little savings to repay and end up being trapped in Debt spiral.

Actionable approach to Debt management and re-payment — Debt Management tips

Identify your Lender and amount you owe along with applicable charges. Ensure timely and full payments of all debts including credit card bills. Mark monthly debt payments on a Calendar to avoid penalties Ensure payment of minimum amount before due dates every month Clear debt with high interest rates first and spend money wisely Calculate charges and penalties and double check in case of late payments of outstanding amounts. Create an emergency corpus and develop multiple sources of income and savings. Plan your big and small purchases in advance to minimize debt Seek help for certified professional and personal finance experts.

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Thank you — Rajiv Mehta