Everyone dreads the Monday morning blues. A week of long meetings, boring business lunches followed by more meetings. Nothing can be worse, right? Wrong!
Now imagine if, during that business lunch, your credit card failed to swipe because your credit supply has been cut off. Or, during that meeting with your colleagues, you were rudely interrupted with a call on your mobile phone where an agent starts threatening you for repayment in a loud voice?
Will you feel like showing your face in office again?
Debt is embarrassing. In fact, it is a downward spiral that can suck you into its vortex leaving you with nothing but the shirt on your back.
Here is what you can do to save yourself if you are already in it:
First say NO!
Swear off all new debt. This is non-negotiable. Think of it like cancer: you need to stop it from spreading, first.
Credit cards or personal loans are the particularly bad kinds of debt.
Stop using your credit card. Pay cash or, better still, don't buy at all. Switch to debit cards if you miss the convenience.
Do a thorough evaluation of your financial condition before committing to a 'good' debt.
Get your priorities right
I am sure you know how much you owe. No? Then you are in serious trouble.
List all your borrowings -- credit cards, personal loans, housing loans, loans against your investments, loans for cars, from friends and relatives. Don't forget to add their interest charges.
Here is a good priority list to follow as per the interest burden.
1 The bad guys -- credit cards and personal loans -- go first. They carry criminally high interest rates. But because they are not very large (hopefully!), pay them off quickly.
2 Next comes the auto loan.
3 Then comes loans against investments.
4 Thereafter, look at loans from your friends and relatives.
5 Since housing loans build assets and offers tax breaks, it is not such a bad thing. Also, whether you pay rent or Equated Monthly Installments (EMI), the cash outflow is more or less the same. Tackling housing loan comes in the end.
Listen to your dad
I am sure your dad went hoarse telling you to live within your means. Now is the time to listen to him. Control your spending.
Classify your expenses. This will help you prioritise:
- Club the essentials together: food, electricity, school fees, telephone, travelling. You cannot eliminate these, but you can cut down on them. Take public transport instead of your car, for instance. Buy grocery from a wholesale market on weekends instead of buying them from the local mall.
- Eliminate luxuries such as weekend dinners in restaurants, movies and new clothes till you are debt free.
Harsh? It is not. As your debts decrease, so will your interest costs.
Get in a little extra
There are many opportunities for you to make some money in your extra time. Get creative. Use your knowledge and skills to the best advantage.
It could be the good old tuition or the latest odd jobs -- insurance advisors, radio jockeys, sales agents at malls or call centre executives. No job is below your dignity.
Get talking
Have an honest chat with your lenders. Suppose you had taken a fixed rate home loan a few years ago, and the interest rates have decreased substantially since, you could try convincing your bank to reduce your rate even if you have to pay a fee.
Or try restructuring your debt if it is difficult for you to repay on time. Maybe you could prepay the loan. If the agreement does not have such provision, try negotiating with your lender and work out a deal.
Alternatively, as a short term measure, try to refinance your debt at lower rates when interest rates fall.
Don't hesitate
Just talking to someone and asking for help might be the answer to your problems. So don't hesitate.
- You may need someone who can support you as you control your expenses or help balance your budget by suggesting cheaper options for your various expenses.
- You could also use help with your investments, which may improve returns on your financial assets.
- A career advisor may help you with some part-time assignment.
- A professional financial advisor may help you to understand the complexities of different debt products and prioritise your debt repayments.
Becoming debt free will be tough ride. But it is a short-term pain compared to long term peace and prosperity.
What is more, you will feel like going to office, even if it is a Monday!
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