• A Guide to Managing Your Debts

    Malaysia does seriously debt issue as of November, 2015, considering a nation-wide debt of $RM 706,950,636,670 at the time this is around US$ 164,573,818,600 and counting. A seriously large number is not the concern. The serious problem might be how the country is dealing with the situation. At the moment, the Malaysian public is relying on the minimum monthly credit card payment which too is being delayed by a percentage of people. Student, housing and personal loans are some of the popular personal finance products but the repayment and poor credit score of the average Malay resident is disturbing. This is why a little guidance to deal with debt management is highly essential.

    8 Steps You Can Take To Manage Your Debt Efficiently

    If you can turn this into a checklist it will be more useful. You will know what to do next.

    1. Avoid Increasing Your Debt:
    2. The first step is to make sure that your total debt is not increased at any cost. If you have credit cards that have reached the limit, keep them locked somewhere safe. When you're done, you should not have access to have more than one credit card and that card should have some available credit left for you to use in case of emergencies.

    3. Make sure that you are keeping a track of your expenses:
    4. It is absolutely essential to keep a record your expenses. Write down your expenses which can allow you to go a go a long way ridding you of debt.

    5. Make categories of your expenses of your ‘Needs’, ‘Wants’ and ‘Luxuries’:
    6. Focus on the needs only, when you are in debt. Once you are financially comfortable, you can't think about the wants and luxuries.

    7. Plan You’re Expenditure:
    8. Based on what you've recorded, prepare a monthly expenditure plan. Write down the expenditure incurred in the last month for each of the above categories, to plan the expenditure for the following month. Do not worry if you feel that you have spent too much. For now, just write. If you spend RM 250 for new clothes, write it down and similarly, If you spent RM 200 to refuel your car, just note it as well.

    9. Analyze your Monthly Budget:
    10. By analysing your budget, you will be able to deduce how much money you can set aside every month to make payments and reduce your debt. By examining your new budget, you can easily find ways through which your overall monthly expenditure can be reduced. However, you need to be realistic and make sure that you do not end up excluding expenses that are unavoidable.

    11. Prepare a priority list of creditors:
    12. In this list priority list mention your creditors and prioritize them based on the amounts you owe, the interest rates charged and payment due dates, etc.

    13. Start clearing your debts:
    14. This is probably the most important and also the most difficult steps in getting relief from debt. Get what you managed to set aside in step 4 and use it to pay off debts. It is a good idea to pay off those creditors that are in the top of your priority list. Over a period of time, you will be able to make a perfect budget and will also not have a lot of difficulty in sticking to your budget. You should continue keeping aside a portion of your income to making payments for your credit cards, loans, line of credit etc. every month so that your overall debt can be reduced.

    15. Stay strong and stick to the plan:
    16. Do not give up and make sure that you stick to the plan so that you will be able to achieve success in the long run and get rid of your debt without a lot of difficulties. There is no magic potion that will help you to get rid of your debt overnight. Quick repairs do not last, but learning how to manage your money can brighten your prospect of paying off your debt. You will not have to worry about the creditors and instead, your time and energy can be spend on activities that are more productive and pleasurable.

    Tips for Managing Your Debts Effectively

    Here are some tips for you to keep in mind, for better debt management:

    • You can consolidate all your debts into a single account, possibly with low and fixed interest rate. You can use the loan to pay off all creditors and then pay monthly instalments to pay off the loan.
    • Take the initiative to cebt managers to explain your reasons, it is likely that they will want to help, offering terms that can be useful to you and will help to keep the debt under control.
    • If you want to buy something, save enough money and then buy. You have to spend only for reasons of absolute necessity (home and car).
    • There are three ways to prioritize the creditors for making payments to them: first, you need to pay the creditors that charge you the highest interest rate, then you pay those to whom you owe the highest amount of money and then you pay those to whom you owe the least amount of money. Each of these has advantages.
    • Reserve some money for you first when you get your pay checks. Many people put debt creditors above everything, even themselves. You should avoid doing that and instead set aside some money in your budget for your survival, to serve as a shock absorber for your expenses.
    • Paying in cash is the safest way to avoid any financial mistake, as well as bank charges. Do not carry a lot of money with you so that you can avoid overspending when you go out to shop. Whenever you can, use cash.
    • If you think you necessarily need help, consider the idea to join a group of Debtors Anonymous. It is a 12-point program for people who have debt problems and unchecked spending and can be a great source of support and inspiration for you if money management is your habitual problem. Such groups operate on social media platforms like Facebook and it will not be a difficult task joining one such group.
    • If you need customized advice about how to manage your debt, you can opt for the services of a "credit counselling" agency as they can help you to deal with your financial situation. However, when opting for such an agency make sure that they have sufficient number of counsellors working during office hours who can be easily reached over the phone and can provide you with immediate help.
    • An effective and easy way through which you can get extra money to pay off your debt could be through refinancing your house. Refinancing your mortgage can be the help you need to settle your debts, because the money you've saved each month with payments at low rate of interest may be used to pay off other debts. Note: You are risking your home if you choose this option.
    • Contact your lenders and creditors such as the credit card issuer, the bank who provided you with a loan and so on. They might reduce the interest rate they charge you. If you have a rate equal or greater than 12%, ask if you can get it reduced.
    • Do not think of debt consolidation or credit counselling agencies as your first choice. Instead, they should be a last resort! Although you may be tempted to make use of these resources, solving the problem by your own efforts will help you understand how to deal with things like that and, especially, how to avoid relapsing again.
    • You should close your debts with each company and, after a couple of months consider the idea of paying off the credit card balances in full every month. For example, if you spend a thousand dollars in month, making a payment of the same amount to your credit card account within the interest free grace period. In the process, you will be able to keep your credit card balance under control and will also avoid paying any interest.

    Finally, everything lays on your will to be able to make yourself debt-free and your country debt-free slowly. It takes a lot of effort but should not be hard if you get sick seeing your bills every day.

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