Manage your debts wisely
Debt plays an important role in our lives.
As most of us cannot afford to purchase everything in its full amount in cash, we borrow money to buy things such as a house and a car to fulfil our desired goals. If used wisely, debt is a useful tool to help you achieve your financial goals. However, if you take on excessive debts, you may face difficulties meeting repayment obligations which would ultimately get you into financial problems. No matter where you stand in your financial journey in the Four Stages of Life—have just graduated or building wealth for retirement—it’s important to know how to manage your debts.
Remember, it is important to only have manageable debts by living within your means and never over-committing yourself financially. Good debt management will help you reach your financial goals faster while poor debt management will negatively impact your life.
It takes discipline and motivation to manage your debt wisely. Here are some benefits of doing so:
Avoiding Late
Payment and
Penalty Charges
Avoiding
Harassments or
Legal Action
Better Relationships
with Family
Improved Cash
Flow Management
Better Wealth
Management
Reduced
Borrowing Cost
Improved
Credit Standing
Improved Cash Flow Management
If you can keep your debts at manageable levels, you should have more leftover money for savings and thus, have a positive cash flow. Having a positive cash flow is always desirable as you have extra funds available each month to help you build an emergency account, pay down debts and capitalise on good investment opportunities. A positive cash flow can be achieved when you have a budgeting process and follow it closely.
Read MoreBetter Wealth Management
A big part of building wealth is making wise choices about debt. By managing your debts wisely, you will reduce your liabilities and, at the same time, enhance your net worth. This leads to better wealth management.
Read MoreAvoiding Late Payment and Penalty Charges
Be a good paymaster! The better you are at managing your debts, the more you can save from paying various charges.
Take the first step in bettering your financial management by paying your debts on time.
Reduced Borrowing Cost
You can pay off your debts faster by managing them wisely and constantly monitoring your progress. The faster you pay off all your debts, the more you will save on interest charges.
Read MoreImproved Credit Standing
If you can manage your debts well, you are creating a better track record for your future borrowings. This is because your payment history is tracked by the Credit Bureau division. By paying on time, your financial credibility will reflect a good credit score. Whenever you borrow from any licensed financial institution, your debts and repayment records are recorded. Due to this, if you have ever been behind on your payments or defaulted on your loans, it would be more difficult for you to get a loan in the future.
Read MoreAvoiding Harassments or Legal Action
To avoid legal action or harassment by your financiers, ensure that you always pay your instalments on time. It is crucial to note that skipping or paying your instalments late will also affect your credit standing. If you think that nobody remembers what you owe them, try skipping a loan instalment. This missed payment will be reflected in your credit score almost immediately!
Read MoreBetter Relationships with Family
The better you are at managing your debts, the better your relationship would be with family members. Very often, families argue or have misunderstandings over money and other financial matters. With better debt management, your relationship improves not only with your family but also with your friends and co-workers. This leads to a more harmonious environment at home and better productivity at work.
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