How to deal with Debt

By January 20, 2015 Uncategorized No Comments

Australians have 33 billion dollars of credit card debt and rising. We live in an instant society of microwaves and downloading movies verses going to the movie store. People are looking for instant gratification.

Now if you are reading this article, you may not have a debt problem or you may have heard these statistics before and think “boring, tell me something I don’t know” so here are some facts that should scare you:

73% of people when they retire will be fully reliant of the government to support them

Australians spend 103% of their income. They are living off credit cards

There is currently 2.3 Australians to every pensioner at the moment. It is dropping and predications are it will be 1 tax payer to every pensioner by 2023.

67% of Australians have a home they call their own but the amount of people with a mortgage has increased by 25%.

So if you have come to the point where you are shouting “That’s It!!!” loudly and are sick and tired of being sick and tired with debt, we have some answers in the article below:

What to do if debt is paralysing you to make a decision or take action

If anyone has read any of Brian Tracy’s information I highly recommend what he suggests to do. The worry of debt can make most Australians stop doing the things that are going to improve their financies. Most people don’t realise they are so close to having a better life.

A golf swing, if it is just a couple of millimetres off can cause a golfer to slice the ball and be tens of metres off the target. In the same way, most people don’t realise if you just took one little step a day. It all starts will filling in our two minute form and get help from one of our financial advisers. SO here is Brian Tracy’s suggestions

Step 1: Is to define the problem or situation you are worrying about clearly in writing. The best way to do this is quietly with your mobile device and start by writing at the top “What exactly am I worrying about?. Many of our worries exist because we have not taken the time to sit down and really define clearly what it is that is bothering you. It could be one line or it could be a couple of things. In the case of debt this could be simple or it could be many things like telling a significant other that you have a debt problem, or your worried about what a bank might do if they knew you couldn’t pay them this month or the next.

Step Two: Is to write out the worst possible outcome of the worry situation. You may lose more money, lose your relationship, lose your job, your investment, your health, the bank might be angry with you. Whatever it is, write it down.

You’ll find by doing these steps, half the time it will quickly start relieving stress that cause worry. It’s like a balloon with more and more air about to burst. You’re sitting at night not able to sleep because worry about it. If you had a note pad and wrote your fears down, you’re more likely to be able to sleep because of this. Once you have written down the worst possible thing that can happen, you will find that you will slowly stop worrying.

Step three is to resolve to accept the worst possible outcome, should it occur. The best thing we can do at this point is to accept this situation because once you have resolved to accept the worst, should it occur, you no longer have anything to worry about.

Step four is to begin work immediately to make sure you bring your debt problem back into order. Having resolved to accept the worst, you are now in a position to do something constructive.

Here are strategies to pay off the debt.

So we need to work on the debt problem- now. Each day we leave it is another day with stress and worry. Below are some ideas and suggestions which can help you get your life back on track and your finances in order. The best idea is to fill in the two minute form and seek the advice of one of our financial planners.

Have some goal setting strategies in place to get rid of debt.

One of our favourite is to use Brian Tracy One minute Goal Setting Technique

Step 1 is to get a clean sheet of paper and write down ten goals with three main criteria

(1) They have to be written in the present tense.

(2) They have to be written positive. Instead of “I don’t have any money” it would be “ I earn 10,000 per month” for example.

(3) They have to be specific. They have to have a date and have an action verb in the goal. For example “ I earn $200,000 per annum by the 31/12/2014”

Step 2 is to circle the one goal that if you achieved would have the biggest impact on your life today. It could be the goal where you have paid off debt, or it could be the goal where you have exdra income which allows you to pay off the debt and more.

Step 3 Is once you have identified this goal that will have the biggest impact, you turn your sheet of paper over and write down 20 action items you can do daily to make your goal of removing yourself from debt. You’ll find the first 10 action items are easy and the last 20 the hardest to find and write down. The best ideas come from the last 10 suggestions.

The important thing is to work every day toward that major goal by simply ticking it off your sheet. This goal setting sheet works with any other goal you would like to achieve like having enough to retire on etc. We would suggest applying this strategy in conjunction with filling in your two minute form and getting a financial planner to help you consistently work on your daily goals.

Communicate with the company or companies you own money to

This goes hand in hand with the above and could help protect your credit rating to some degree. Our clients advise us that initially they are scared or worried to call the bank or non bank lender because they don’t know when they can pay and how much. They are also worried that the bank will take their possession like their house.

The first thing you should do is to work out how much you can pay and by when, even if it seems ridiculous. The worst thing you could do, is avoid their calls and communication. If you do this you are more likely to have problem with your credit rating or they are more likely to want to take your asset.

All the bank or entity that lend you the money want to hear is:

(1) You are making every effort to pay

(2) You are willing to meet them half way and make some sort of payment

(3) When you will be able to pay off any arrears regardless of how long it may take you.

So if you need help with this process and setting a budget in place to be able to intelligently advise the company you own money to when you will be able to pay them, it’s important you fill in our two minute form. A financial adviser can make sure you stick to you plan and consistently pay what you owe.

If debt is caused by a habit or lifestyle situation, address this problem

If there is a serious reason you have a debt problem either psychologically or a gambling problem for example, we would of course suggest you get professional help. We never claim to know all the answers and suggest you access Gambling Help Online or call 1800 858 858 for help with a gambling addiction.

Is it the Latte factor?

A financial author call David Bach who has been featured on the Oprah Winfrey show talked about the reason people don’t get ahead is because what he calls the Latte Factor. This is a good analogy to represent what could be happening for you and why you may not be where you want to be.

Let’s say a coffee costs $4.00 a day and you bought a coffee every day (and we know some people by two and three coffees a day) that would be $20.00 every week and by the end of a 48 week year (allowing for you to go on holidays) it would be close to $1,000!

It may not be a coffee, it could be some pay TV subscription, or a newspaper or magazine subscription. The bottom line is this little bit of money adds up and takes away from you getting ahead financially.

It is time you sat down with a financial planner and put a plan in place to work out what your latte factor is? All you do is fill in your two minute form and set yourself on the best financial path.

Use some of T. Harv Eker’s strategies to deal with debt.

Another concept of how to get ahead with debt comes from another financial author called T. Harv Eker. The anology he draws upon is a child with an ice Cream. He drops the ice cream and when his mother takes him to get another ice cream (he is crying of course) the child sees the “super doper triple scoop ice cream”. Would the mother really get the child a bigger ice cream if the child cannot handle the one scoop of ice cream?

So the point of this story is you are not going to make more money than you are right now unless you can demonstrate you can handle what you already have. So one way to do this is to start by creating some jars which you put a little bit of money in each week, fortnight or month in. They would be labelled as follows:

Financial Freedom. This is the money you use to invest

Contingency account: This is your rainy day account

Play Account: You blow this money on something you want-like closthes a massage or going out drinking with friends.

Long Term Saving for Spending. This could be for a holiday or car purchase or house

Education. We should educate ourselves financially to get ahead. You may also need a financial coach life a financial advisor to help you get ahead.

Now for some people to do this, they feel they couldn’t put any money away. The tax office are doing this right now by withholding a little bit of money every week from your pay check. Could you start with $1.00 or 10c in each jar? Most people could. You’ll find that this will increase to 20c and then 50c right through to a $1 and beyond. Soon you’ll find you’ll be able to handle your money better and getting rewarded by having no debt.

So will you make the change financially now?

Sadly the reason people don’t have financial future they have wanted or desired is debt. It controls their life and if you don’t have any money left what are your options to get ahead. We can work harder, get a second job, or live well beneath our means. Does any of these strategies seem good?

We suggest if debt is preventing you from getting ahead you fill in our two minute form and advise us in the comments section what your situation is. Most financial advisors can help with budgeting and have budgeting tools which can help show the light at the end of the tunnel. All you need to do is give them a chance to help you- you’ll be glad you did.