Be debt-free for financial security

Many people go through life without any sort of financial planning and thought about saving.

They tend to spend impulsively and sometimes make huge decisions like buying a house or a expensive car at the spur of the moment, without suitable thought to the financial commitment it will need. Thus the result is debt, mortgages, car loans and mounting credit card bills.

The first step towards financial wellbeing is to get free of all the debt that has been accumulated in the past, because by doing this not only can you wipe the slate clean and make a new beginning. Early settlement of your debts will also lead to huge savings in terms of the interest you are paying for your impulsive buys. But it's not so easy.

KV Shamsudheen, Director, Barjeel Geojit Securities, told Emirates Business: "If you are one of those people who spend whatever they earn, then first you have to make up your mind that you are going to curb spending come what may. "For this, you have to get your family on board too as this decision to cut back on the lifestyle will affect them also.

"Once you have done that you need to decide how much you are going to save each month from your salary to pay off those debts and then tailor your life around it. That's the way it has to be done. If you decide to save whatever is left after you have met all your expenses, then that will not work well."

Once the decision to be debt free despite major lifestyle changes is made, then you can start by making a list of what you owe. Start with the biggest debt first, then make a list of the minimum monthly payment you are making for that loan and also the interest rate you are paying. By the end of it all you will have a clear idea of where you stand. The next step is to tighten your belt and pay off those loans one by one. It is a good idea to start with the smallest debts first as this will give you a sense of achievement and spur you towards the goal of being debt free.

Alternately you can also decide to pay off the loans with the highest interest first like your mortgage or your personal loans as this will result in savings in the huge amount you would have paid in interest.

If you are dealing with huge credit card payments then double the minimum monthly payment and stop using that credit card. Once you have paid off all the money for that card, notify the bank that you want to close the account. Don't keep that card as you might be tempted to use it again and the whole thing will start over.

Also, don't roll balances from card to card. This is a tempting way to make yourself believe that you're doing something about your debt problem, if only by lowering the interest rate you're paying. When those low introductory rates expire, you could be stuck with huge balances on high rate cards.

Next, make a spending plan to keep your impulsive buys under check. To do that, track the money that's coming in and going out.

Use your debit card instead of credit card as this way you will not be in danger of running up new debts as you can only use the debit card if you have money in your account!

It may be difficult at first but once you become debt-free then you can start planning for a better future.

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