By Derick Kagurusi Byaruhanga
When I started my financial planning career, I quickly learned that the people who were financially successful were the ones who dedicated time and energy to regularly budgeting, managing and planning out their finances. In other words, they had the financial discipline to get a financial education and continue to expand that financial education over their lifetime.
A financial education is something almost no one receives growing up, yet it’s one of the primary components of financial success.
Am sure everyone would be happy if he or she had a formula that allowed him or her never to worry about the finances any more.
As that may not be the case or realistic below are some simple things that can be done to improve the money situation.
Set up a financial goal
This can be done by one writing down specific and long-term goals like early retirement, owning a home, debt payment and investment and all this will be affected by how you manage your finances. Once you have been able to write them prioritize the goals to help you formulate a financial plan.
Formulate a plan
This is an essential tool in helping you achieve your financial goals. It helps you schedule and plan your monthly budgets, spending plan and debt payment. This plan should hold long term goals that you prioritized earlier as you also work on short term goals that will always boost your finances as you look up to the long-term goals. At this stage most people forget the short-term goals like decreasing your spending, sticking to the budget, paying down or not using your credit cards. So, its important that these short-term goals are never left out since they contribute a lot to financial management and freedom.
Draft and stick to the budget
For any financial success you must have a budget. Its a tool that allows you to create a spending plan such that you can allocate your money in away that will help you achieve your financial goal. This budget can either be high level nor detailed one so long as it can help you achieve your ultimate goal of spending less than you earn, paying off your debts, create an emergency fund and saving for the future. A budget helps to limit one on spending on things that do not enhance one’s future by not spending on things that seem important now.
To reach your financial goal, you must have concentrated on this sensitive aspect of financial management which has become a huge obstacle for many when it comes to achieving financial goals.
Debt management is simple but it requires great financial discipline. Below are some of the steps on how to clear off your debt
Strategies to pay down debt
Top of Form Bottom of Form If you are in debt, you probably know you need to pay it off, but aren’t quite sure how
There are a number of strategies to make paying off your debts easier so you can get out of debt more quickly. But it’s important to keep in mind that no matter which strategy you choose, you’ll eventually need to address the issues that got you into debt in the first place.
We looked at some of the top debt payoff strategies out there and compiled the four best ones.
Get on a budget
One of the first things you need to do is to set up a solid budget that you can (realistically) follow each month. This is key because it will stop you from going further into debt.
Your budget is your biggest t tool in helping you get control of your finances. Once you have set up your budget, you’ll be able to earmark funds specifically for paying off debt. This will help you get out of debt much more quickly than if you were just paying the minimum payments.
Your budget will help you find more money to put toward debt, can keep you from going further into debt each month, and gives you control over your money
Set up a debt payment plan
Next, you’ll need to come to grips with how much you actually owe. You can set up a debt payment plan by listing the amount you owe, the creditor, the interest rate and the minimum payment for each debt. Then list the debts in the order you want to pay them off.
There are several ways to do this: You can do this from the highest interest rate to the lowest or from the smallest debt to the largest. You can use a debt calculator online which will help you see how quickly you can pay down the debt by increasing the amount you pay towards debt each month. The more you can apply to the debt, the more quickly you will be able to pay it off.
Lower your interest rate
lowering your interest rates means that more of your payment goes directly to the principle of the loan rather than to paying for interest.
There are a few options here. First, you can transfer credit card balances to one that is offering a temporary 0% interest rate. This will help you save a lot of money over the year, as long as you are focused on paying off the debt, and as long as you pay off that debt within a year before the interest rate goes back up.
Another option is to take out a consolidation loan, but be wary of using your home’s equity to do so. If you do a consolidation loan, you want an interest rate that is lower than the rate you are currently paying and one that is set. If you choose either of these options, you need to stop using your credit card immediately so you do not add to your debt and end up in a situation where you owe even more than you do now.
Be sure to read the fine print when applying for a consolidation loan, since interest rates might change.
Credit counselling and debt settlement services
If you are really having a difficult time making your payments then you may want to consider a credit counselling or debt settlement service. These services do show up on your credit report and should be a last resort before bankruptcy.
You need to be careful about the company you choose to deal with since many can be predatory of charge exorbitant fees. You can negotiate debt settlement yourself if you are already behind on your payments. If you do settle your debts, it may affect your taxes, and you need to be prepared to pay taxes on the amount that is forgiven.
Staying out of debt
Once you have worked hard to pay off your debts, you need to work hard to stay out of debt. This means you should continue to budget, and that you need to plan for the future. Setting up emergency funds and sinking funds should help you to deal with unexpected expenses and for car repairs.
You will also need to create a solid financial plan that plans for expenses like building your first home and retirement. Although you may not want to continue sticking to a budget and closely monitoring your spending, you will have to make it a part of daily life if you truly want to pay off debt and be financially secure.
Derick Kagurusi is a holder of a BBA (hons MAK), and an ACCA student as well as an accountant. Derick is a junior accountant and ACCA student who helps people meet their life goals through proper management of personal finances to achieve financial freedom
Kagsderick96@gmail.com | 0772094752
For any financial advice we are available.