Tuesday, January 10, 2012, AM | 4 Comments
You can set goals any time, any day of the year. It does not have to be a resolution for the new year. Traditionally, folks make New Year’s resolution for a variety of reasons. One of the most pressing subjects to attack in the new year or any other time is reducing and eventually eliminating debt in your financial life. There are different types of debt but setting goals to achieve freedom from debt is basically a few generally accepted steps to take.
What is Debt?
Simply defined, debt is what you owe. The definition is simple but once in debt, the repercussions can be enormous, especially when the debt gets to be so large that you are unable to pay it. You use the money now and pay later.
A debt is created when creditors, under their own terms, agree to lend money to the debtors. When debtors repay the loan, they must pay interest on the principal they had borrowed. In the whole quagmire of debt, interest can be the culprit why most folks are unable or have hard time paying the debt.
Types of Debt
There are many types of debt, some good, some bad. I have tried to identify a few of them.
- Credit Card Debt
The most pressing is credit card debt. The main reason, experts tell us, is that we just keep buying things we actually don’t need. Let’s face it. We are a nation of copycats. We have to have something that our neighbors have and we don’t, especially expensive enough that we cannot even afford it. But buying is easy. Take the plastic out of your wallet/purse and buy it, without realizing we have to eventually pay for it. We, then, start paying the minimum every month and the debt keeps ballooning month after month.
- Secured Debt (Loan)
A secured loan is when the creditor makes sure that if the debtor is unable to pay back the loan at some point, the borrower must present some kind of collateral in the form of property. Mortgage, car loan, business loan are typically considered secured loan. It’s secured loan only for the creditor and not the debtor.
- Unsecured Debt
In this kind of debt, your obligation of course is to pay back the loan. If at some point, you are unable to do so, there is no collateral damage. You just default and be on your way. Typically credit card debt belongs to this type of loan.
- Banker’s or Baker’s Dozen
In some loans, extra amount is added such as points in a mortgage loan that gets to be more than the actual loan. You owe twelve (dozen), receive a loan of eleven.
Set Goals to Pay off Debt
Resolutions can be made and frequently broken. When you set goals, to meet them you must have the mindset of a professional, of a project manager, and have the determination and resolve. To meet any kind of goal, you frequently face hurdles which you need to overcome. Some experts tell us there are five objectives to be met to achieve your goals.
Define: Specific means that the objective is solid, detailed, focused and well-defined. The objective must be straightforward and emphasize action and the required outcome. Specific also means that it is results- and action-orientated.
Apply: If you have more than one kind of debt, you should spell out a detailed plan that is focused and well-defined.
Define: The objective must be measurable, meaning the actions taken must be tractable.
Apply: No matter what method you use – manual or computer program, you must be able to measure your path of success (or failure) of paying off debt.
Define: Objectives, unlike your aspirations and visions, need to be achievable to keep you motivated.
Apply: Start with taking a small step that is achievable in reducing your debt.
Define: The achievement of an objective requires resources, such as, skills, money, equipment, etc. to the task required to achieve the objective.
Apply: To reduce debt and eventually pay it off, you must be very realistic at the outset so you can achieve your goals. You must be able to provide time to figure out where you stand at any given time.
It means setting deadlines for the achievement of the objective. Deadlines need to be both achievable and they must be realistic.
Apply: Set deadlines when you would be able to reduce and eliminate your debt.
In a Nutshell
You can get out of any debt. May it be a credit card debt, a student loan, a mortgage loan, or any other person loan, experts have a variety of solutions to pay back the loan. Of course, nobody has a magic wand to help you overnight unless you win a lottery (I suggest you stay away from it.) It’s a problem for many more folks but not impossible to solve.
What other tips would you add to this list? Share your thoughts in the comments below!
In the meantime,Facebook.com/doable.finance