New Year brings with it new beginnings for all walks of life including financial management. Everyone wants to have a good and perfectly organized financial life but seldom do people achieve the goal. One of the biggest reasons that people fail to attain their financial freedom is due to the dreaded debt tarp. Debt can eat into one’s finances silently. The larger the debt, more cash flow is involved into paying off the underlying interest. As the interest of various debts gets compounded, so does the overall financial health. This New Year make a resolve to manage all your debts intelligently and smartly so that you can usher in the New year free of any old debt traps and plan your financial future with freedom.
Avoid Impulsive Spending: Prevention is better than cure it is said. Nothing can be more apt when it comes to avoiding a bad debt trap. Cutting out impulsive spending can be one of the best decisions to avoid a debt trap situation in the future. A lot of people shop impulsively without any purpose and need. If you are one of those with a bad habit of over spending or buying things that you do not necessarily need, spending less and saving more may be the perfect remedy for you. In this day and age of economic uncertainty and global recession, a penny saved is a penny earned. Controlled the bout of impulsive spending may not mean living the life of a miser but a more self controlled living resulting in better financial well being over a long term.
Pay off Old Debt: The best way of bringing down debt is to pay it off before the debt gets compounded. If you have some extra cash in hand, use it to pay off old debt rather than using it for other expenditures. Debt with higher interest rates like credit card bills, personal loans and home loans must be finished off first compared to other debt. Annual bonuses and perks and benefits that you may receive from your company can be used exclusively for paying off such