Debt Trap

How to get out of Debt Trap Every one of us take some debt for one reason or the other. Debt free persons are a few. So can we take as granted that every one is in Debt Trap?. The answer will be “no”. Then What is debt trap. The simple answer will be living beyond ones means or expenses not In proporation to earnings. Now a days getting into debt is very easy. There are so many banks behind you offering you Credit Cards, personal loans, vehicle loans, housing loans and many more. The grocery shop owner also gives loans. The shopkeeper where you purchase whitegoods, Software etc also gives you loans. In good old days you had to run to banks to get a loan sanctioned, sign the agreements, deliver the documents as required by the banks. Now the bankers come to your house to give you the loan. There is huge flow of credit cards from all the banks. And added to it there are huge discount offers/cash back offers all round the year . And also a devil called EMI. All these lures the common people like us to buy things where we commit our future income(by way of EMI/credit card purchases etc.) for the present. As we try to get more things the future incomes goes on reducing. The condition will worsen if we take more than one source for our finance. If we cross a limit of income which serves the debt ,we will loose our control on our finances and we are in debt trap. Methods to come out of debt trap: 1.Prepare monthly income/expense account. Note down your income stream like salary/business income etc and also list down what are your expenses. 2.See where your money is leaking and try to patch it. From above list you can easily see what are the unwanted items of expenses and try to avoid them. 3.Prioritize your debts from high int. bearing to low int. bearing. List down your debts, amount, interest etc. From this you can make out which debt is carrying high int. and which is carrying low int. 4.See how much amount you can set aside to clear your debts. From your income and expenses account you can easily make out how much amount you are left with to repay your debt. The higher the amount left with your earlier you will be debt free. 5.Calculate how much amount you can allocate to high int. bearing debt. If you pay high int. bearing debt first your interest outgo will be less and you will have more money at your disposal for repaying other loans. 6.See if you can get low int. bearing debt to pay high int. bearing debt. As said before early payment of high int. bearing debt has twin advantage. The int. outgo will be less and more amount will be at your disposal to pay other loans. So you can take Low int. bearing debt to immediately repay high int. bearing debt. 7.Make a commitment not to take any new debt. Make a commitment not to take new debt and stick to it. 8.Postpone any new high budget purchase. If you are making any idea to purchase any high value item kindly postpone it unless it is Very very essential for you. Good Habits you can develop: Have your monthly income and expenses budget. List out your income and expense and verify with above. Save at least 30% of income for future. Before taking any debt / using credit card think twice. Plan well about finance before investing in high value items. Hope this post is useful to you. Kindly leave your comments for making my posts more effective.