Debt Management Tips for Businesses and Individuals
Debt is a very important financial tool. Almost every individual and business has used debt at some point in life. However, did you know that debt can lead to bankruptcy if not properly managed? We have seen successful businesses going to their knees because of debt. This article is going to highlight a few debt management tips for businesspeople and individuals.
Stop Borrowing
The first debt management tip that works big time is putting an end to the use of debt as a source of financing. If you are in business, you can resort to equity as an alternative source of funding. Generally, if you are in debt, you are already in a hole. Stop digging deeper lest you disappear entirely.
Most individuals and businesses in debt have the tendency of borrowing Peter to pay Paul. This tactic doesn’t help in any way. By paying one debt and incurring another of the same size, you will be at the same financial position at the end of the day. However, your credit score will take a big dip because the number of creditors has increased.
Make Plans to Clear Your Debts
You are not likely to escape paying your debt. Therefore, come up with a workable plan on how you are going to pay every penny you owe. Make a list of all creditors in order of priority and decide how you will adjust your finances to accommodate each one of them.
As a rule of thumb, you should start with the secured debt first, then move to the unsecured debt. You can negotiate for more lenient repayment plans where possible. You will need to come up with a monthly budget that will allow you to pay off your debts while still making ends meet.
Live Within Your Means
Most businesses use debt for expansion projects. Expansion is good for your business but it may prove to be your ultimate undoing. It is better to bank on retained earnings to fund development projects than to take expensive loans that may destabilize your financial position.
On the other hand, if you use debt to bankroll your lavish lifestyle, you will soon be paying for your sins. You can still live a modest life and have fun. Therefore, start on a new page and live within your means. Always come up with a plan on how you will spend your money. Avoid impulse buying at all costs.
Consider Debt Consolidation
Debt consolidation is a strategy that puts together all your loans into one big secured loan. However, it is not for everybody. It has its own advantages and disadvantages and you want to determine how it will affect your financial position in the long term. It may reduce your monthly payments and lower the interest rate, but it can easily lead to the loss of the secured property, which is usually your home.
In summary, if you are feeling overwhelmed by your debt, you are not alone. Everyone is a defaulter, just that …