Get your financial freedom back
Debt is in the news right now, but it’s not just Indian banks that are accumulating it. Ordinary Indians are seeing a big jump in their loans and debt payments.
The average debt per rural family has jumped from Rs 7,500 in the last decade to Rs 32,500 now, a growth of 300%.
Average debt in urban homes has gone up from Rs. 11,700 in the same period to Rs 85,000, a jump of 600%.
Personal debts and loans are a problem many people find hard to talk about. But it’s important to get past the embarrassment - this is a common issue for many. And the lessons you learn in managing your debt well are valuable, ones that will help you manage money better in the future.
How do you manage your debt? There are a few things you can do.
STEP 1: Find out your CIBIL score
If you are struggling to pay off a current loan, find out if you can get on a better plan or transfer your loan.
The first step here is to find out your CIBIL score. The CIBIL score is something banks and loan providers check to see if they can lend you money with confidence. A good CIBIL score is anything above 750/900. You can find out the score through an online application on their website.
Knowing your CIBIL score will help you assess whether you will qualift for a loan with better terms at your current bank or another bank.
STEP 2. Negotiate payment terms on existing loans
Speak to your bank with you CIBIL score in hand, to find out the best payment terms you can get. Also research other banks to see if there's a fairer loan on offer - you can then transfer your loan from your current provider.
STEP 3. Take your credit cards out of your wallet/purse
While you are resolving your loans, it’s important to remove the chances of accumulating additional debt on your credit cards. Make it as difficult as possible to pull out your credit card in order to spend.
Put the cards deep inside a drawer, lock the cupboard, and keep the key somewhere far out of reach, so that you have to go through at least three steps to get your card.
Or seal up the cards in several layers of paper and tape so that you will have to spend time opening up everything each time you have to use the card. Freeze your cards in a water container. Basically, you want to make it difficult for your future self to impulsively buy something.
STEP 4: Identify your spending triggers. Look through your past bank statements, and debit/credit card records
Our memories are faulty. We don’t really remember things all that well, especially things we feel guilty about, like overspending.
So open your statements over the past few months and make a list: what were your biggest splurges and expenses? This will give you an understanding of what to watch out for. You don’t want your weaknesses to sneak up on you every time. This will help you stay out of debt in the future.
STEP 5. Budgeting apps and software are your friends
There are plenty of free budgeting apps out there that help you manage your money better on an ongoing basis. Check out this list for a free app that is suited to your particular needs. These personal finance apps automatically track your statements, help discover the best offers, and split expenses with your friends.
STEP 6. Learn new saving hacks
You shouldn’t stop having fun. But learn habits that help you make better choices and save, to avoid increases in debt and manage your current payments. Here are some examples of savings hacks:
Make a list before going out shopping. It’s a simple step that will compel you to think before impulse buys not on the list.
Check your mobile phone plan - can you get a cheaper one? Mobile phone bills often end up as a big part of your monthly spends.
Do you enjoy what you currently spend money on? Find out events you can attend besides movies and pub trips, that are fun, like free live music events, art galleries, book clubs, trekking. These usually hurt your wallet less.
Use extra cash that comes in to immediately pay off some of the debt you have, and put some money into a fixed deposit or savings instrument. Any additional money is a great chance for you to get yourself into a comfortable position financially.
Avoid temptations: Install an adblock so that buying suggestions don't follow you around while browsing. If there's a store you tend to frequent. try a different route, listen to music/podcasts while you travel as a distraction.
Gratitude: This is very Zen and known to work. Take a few minutes out everyday to think about what you are thankful for. Our brains are primed to respond to threats and negative triggers: it’s how we survived in the jungle. Noticing the positive requires an active habit, and it helps make you happier with what you already have.
These habits are also surprisingly fulfilling. You will find out that it’s possible to have a richer life with a smaller outlay of cash! Good luck.
