When our income is not enough to cover basic needs and our lifestyle is not in line with our financial reality, we are more likely to get into debt. White (2019) recommends “denying ourselves a thousand things before getting into debt.”
We should not handle financial matters in such a way that we get into debt and adapt to our circumstances, nor borrow to avoid being overwhelmed by debt.
Remember that debts “can cause anxiety, stress and depression, and affect personal and work relationships. They can lead to the loss of important assets (house, car, etc.), which could be devastating for finances and self-esteem” (CONDUSEF).
According to Coperva (customer service and debt collection startup), the reasons why we do not pay our debts are because:
we were left without work.
our income has decreased considerably.
the debts incurred have accumulated.
creditors or lenders have not respected the agreed terms and conditions.
We are irresponsible in meeting our financial commitments regardless of the consequences.
But if we already have them, we must face them, so it is important to develop a plan to pay them and have better financial health. CONDUSEF proposes the following:
Identify the severity of your debt . Create a budget, distribute your income to know how much you will need to cover your needs, so you will know your ability to cover the debts you have incurred.
Tackle your debts. Ask yourself: How much do I owe in total? How many debts do I have? What is the minimum amount I have to pay on each one? Which ones can I pay off as quickly as possible?
Pay what you owe. Make a list of your debts from largest to smallest, considering the due dates. Pay a larger amount than is required to meet the commitment in less time. Apply the same amount you were paying to pay the next debt, and so on with the others.
Set a deadline. Define the time frame for getting out of the financial problem, without deviating from the plan.
Don't change the plan. Discipline yourself and stick to it! Stick to the chosen strategy.
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