Hello Readers!
Are you suffering from a debt trap turmoil?
Debt Trap, a stage of your life when you are surrounded by kinds of debt from all around and you can’t find a way to get out of it. The dark side of the debt trap is it destroys the individual emotionally.
A Debt trap, at an early stage in life, is normally triggered by a combination of credit card debt, personal loans, car loans or just borrowing from friends and family. The situation is normal till you pay the monthly installment with interest, but this debt of yours becomes a trap when you struggle to pay just the interest and the minimal principal back.
Coming out of a debt trap is much more important. It can steal your financial freedom, if not completed on time. If you are also suffering from a debt trap turmoil, we suggest following the below four steps, they can help you in getting out of the debt trap.
Commitment Is Necessary
A Commitment made to yourself to get out of the debt trap plays a major key role. Get yourself filled with positive vibes and fix a realistic timeline to get out of the trap. It could take a year, maybe even more.
Speaking to people who have come out of the debt trap and now have a good financial position will also help you a lot. Through their stories, you can find out your ways to come out of the debt trap.
Manage Your Expenses
Once you commit to getting rid of your debt trap, get one thing much clear, that now for some time, the debt amount to be paid each month is one of your most important monthly expenses, and you have to adjust them in your monthly budget. First, analyze your expenses. For that download your last 6 months bank statement, credit card statement, and calculate your total expenses. Now optimize your expenses and plan, including the debt amount to be paid monthly.
To include the debt amount in it, you might have to eradicate some of your expenses like:
- Some regular expenses that make no big difference in your life.
- Expenses on your trendy lifestyle. For some time, step down on your lifestyle a bit and try online shopping, you can always find some good options which are cheaper.
- Sell some assets if you have to or ask the help of family members.
- Spend for your needs and not for your wants.
Ensure your overall spending is less than your income, with some money remaining.
Reduce Your Debt Systematically
Now that you are saving from your income to pay your debts, start reducing your debts systematically. This you can start with the high-cost borrowing debts like credit cards, personal loans, or others. Try and reach a stage where you are clearing your credit card bills at the end of each month.
Do the same for your personal loans and another such kind of debt. For loans such as car loans, do let the term pass and make sure you don’t stretch yourself once again. Target a point when you reach there your borrowing is nil.
Be A Money Saver, Leave Behind The Borrower
To avoid the debt trap again to happen, you need to change yourself from being a borrower to be a money saver. Open an investment account and start investing in mutual funds. Let your money work for you, instead of working you for your debts.
Before you start investing create your emergency fund in liquid funds. Your emergency fund will help you from landing in debt due to sudden financial emergencies. Start saving for the long term and for key goals in life. For longer-term savings, invest in equities or equity mutual funds.
For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).