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How to get out of debts?

There was a time you were living a normal happy family life. You had ambitions and great plans. You started with a long-term housing loan. Then took credit to furnish your house, and conceivably even got a new car. Or you may just have an ordinary life and started buying everything on credit to satisfy your demands. In next to no time you find yourself crunching under debts.  The months seem elongated and the bills continue piling. We know how it feels like when you can’t meet family’s expectations. How often you are irritated when your kids ask for money due to your own frustrations? Every month-end is a permanent battle between your pocket and your debts. While your friends are enjoying healthy lifestyle, you are struggling in an ocean of debts.

Debts shackles

You avoid social gathering and do not know who to turn to. You are too stressed and your mind has stopped functioning. Do not surrender! FACE IT! Get hold of yourself and try the following strategies now.

1.                Accept you are in a crisis In the middle of a crisis, first accept your circumstances and take necessary action. Take a paper and pencil or sit in front of computer and make list of:

Interest charges

All outstanding

Monthly recurrent bills; i.e. rent, electricity, etc

2.                Avoid taking any further debts

Sittings on huge debts? Say no to further debts. According to the “Association Pour Emprunteurs Abusés” (APEA), three out of four Mauritian households are struggling to pay their debts. Survey carried shows that 50% per cent of Mauritian households have contracted loans for property acquisition. While 75% are struggling to pay their monthly dues and 15% are facing severe problems because of over-borrowing.

3.                Organise a garage sales

Look around your home and you will find many useless stuff staying idle and occupying space. If you spot anything lying around for two to three years, get rid of it.  Sell all metals and scraps. Old books, bicycle, tools, you name it.

4.                Plan your spending

Start planning your expenses and always try to spend less than planned, this will allow you to make some savings and make you eligible for paying the debt more easily. Once you plan your expenses it will help you in future to stay on track and save for the future.

5.                Try using some online tools There are many applications and online tools on the Internet to help you prepare a budget. If you are an information technology user, why not use these online tools to keep track of your debts and expenses. There are also mobile applications which you carry with you and consult at any time.

6.                Re-check your expenses Check your spending list again and find if you can cut off anything from the list. Any item cut from your list will save your money. Bottom line: cut all unnecessary spending.

7.                Try to stick with your budget

Make a budget and try to stick with it, even try to reduce your budget to save money. The other best way is to earmark part of budget for debts repayment and keep the remaining slice for household expenses.

8.                Involve the family

Try to involve your family in your saving plan. Involve your spouse and your kids in this venture. Also identify the party who is spendthrift or a compulsive shopper and let the other partner manage the finance. You cannot do it alone. Make sure you got all your support to go through this crisis.

9.                Buy Quality used products instead of buying new ones

While you are in debt, opt for second-hand or used items. You can find many interesting stuff on the web or newspapers. Save your money and always look for secondary market alternatives when you need to buy a new item.

10.             Look for rebates and promotion sales

When you buy groceries or any household items, look for rebates and promotions. Beware of the “buy two get one free” adverts. You end spending more. Plan your shopping list well in advance before going to malls and do not buy what you do not need. This will help you save money and eventually ease your budget.

11.             Take a second job

Not able to cut expenses, try a part-time job. Increase your income and payoff your debts easily. This technique is useful for you as you may continue doing job after paying off all your debts to save money for rainy days.

12.             Pay long-term debts first

Long-term loans are costly in terms of interest. Consider making a balloon payment whenever you have any excess funds.  This will allow you to cut interest running over 15-20 years. The best tactics is to concentrate on the highest interest paying debts.  Alternatively, you may pay the small debts first and then concentrate on the big one later, if this can motivate you.

13.             Pay bills on time

Pay your bills within due dates. Avoid fines and penalties resulting from late payments.  Make a checklist of recurrent bills and stick it on your fridge or other prominent places if necessary. This way you will not forget when they become due.

14.             Never pay a debt with the help of a new debt

Don’t take new debt to pay an old one. People who do so are just fooling themselves and getting entangled further in the spiral of debts. Don’t cut corners and use cheap methods to pay your debts. You do not want to hide in your own home when your friends or debt collectors knock at your door.

15.             Show determination

On the road to recovery, at times you will still need more money. Your car won’t stop breaking down or you may bear medical expenses or have to visit a sick relative. Don’t let such incidents distract you from your goal. Take it as a test for your commitment, stay firm!

16.             Celebrate achievements

Celebrate your achievement whenever a debt is paid; this will give you a warm feeling of relief. That doesn’t mean that you should go to five-star restaurants and spend hundreds of rupees. Give yourself a treat: buy some cakes and enjoy it you’re your family.

17.              Avoid borrowing money

Never borrow again and live within your means. Never get back to the old habit of borrowing money. The sooner you deal with your debts issues, the faster you will be on track. Never under-estimate the load of debts, it can ruin you. Stay afloat, concentrate on your objectives, make a firm commitment and stick to your plan. Best of luck to you!

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