How to pay your debts (step by step)

May
12, 2021

6 min read

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.


This story originally appeared on Alto Nivel

By Universidad Panamericana – Roxanna Romero Meixueiro

There are situations in our life that cause us great stress , take away our sleep and can even reduce our health. For example, having a sick relative, a personal problem such as a divorce, a child with behavioral problems, etc; But in these times if there is something that can worry us a lot, it is … having debts and especially how to get rid of them.

Those who have gone through such a situation can attest that n can take away or only sleep, but can also cause family problems, health, labor, etc.

There are cases where they are the result of poor planning and / or recklessness but also some are caused by facing unforeseen events such as the loss of a job, a health problem, or what we are experiencing now, an economic crisis caused by a pandemic. .

But not always acquiring a debt is a negative thing, for example, thanks to the loans many entrepreneurs were able to start their business and grow, being able to have a flow that solves its operating expenses. However, when acquiring this type of obligation it is important to maintain a healthy level of indebtedness so that it does not become a problem later.

But when there is a level of indebtedness much higher than that which can be solved, that is when the problems really begin.

There are books, articles that make various recommendations on how to deal with this type of situation. Next, I will share some points that I think may be useful:

1. “Close the tap”

Stop and don’t keep spending. Make an analysis of the expenses, reflect and ask yourself, especially when you want to buy something, if I really need it. In other words, you have to “tie your belt”, since this is the only way we can regain control of the situation little by little.

2. Have a budget

It may seem obvious, but like companies, we have to have a monthly plan of the expenses we have to make and see that they do not exceed our income. Put first the basic expenses such as groceries, rent, payment of services, tuition fees, etc. and then see how much I can dedicate to pay the debts that I have.

3. List the debts we have

Sort debts from lowest to highest, and from highest to lowest interest and thus settle them one by one which will allow me to see the progress in their payment.

4. Prepare in the “times of fat cows” to face “times of lean cows”

When we have a secure income or extraordinary inflows of money we must take advantage of it to SAVE, and I put it with capital letters since usually when one has more flow, they usually think about how it can be spent; Of course, it is important to indulge yourself, but always in a measured and planned way. This is highly relevant, since these savings will help us cope with unforeseen times such as illness, economic crisis, supporting a family member, an accident, etc.

5. Avoid expenses that are not essential

For example, gifts, coffees, unnecessary treats, which if made day by day can represent a fairly significant amount at the end of the month. When one is in a financial improvement plan, it is advisable to apply austerity.

But when there is a level of indebtedness much higher than what can be solved, that is when the problems really begin / Image: Depositphotos.com

6. Analyze if I can negotiate the debts

Financial institutions have payment plans, which can be an option to solve the situation of some debts that they have.

7. Do not finance one card with another

This would be a spiral that would not end. It may seem logical not to do this, but worry or stress can lead to totally wrong decisions.

8. Be very realistic

If we see that it is a difficult situation, then evaluate having an extra income, that is, getting a second job or working overtime, etc.

9. “To great evils, great remedies”

If I am in a case such as the loss of a job or any other situation that is complicated, then I have to analyze what my strongest expenses are and seek to reduce them, for example: one of the significant expenses is usually housing and one of the Options could be looking for a “roommate” or going to live for a time with a relative, or if the expense is tuition, look for scholarships or a school that is more accessible, and so on.

As a final reflection, we must think that soon it will be a time to pay bonuses, savings funds, etc; which is a great opportunity to settle debts and above all to reflect that in these times it is important to TAKE CARE of money and not make unnecessary expenses.

I think that learning from these situations will have an impact not only on the present, but on all the decisions we make in the future. Prevention and no reaction is one of the best tools we can have in our life.

* Roxanna Romero is Program Manager International Master’s Degree in Finance and “In company” Masters Faculty of Business at the Universidad Panamericana

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