For security reasons, your session has been timed out. To continue, Please login.
Debt management companies prioritize and allocate your debt. Instead of paying off the previous creditors and replacing them with a single debt source, you are keeping the same creditors, but having one person manage the payments for you with money you pay them from your account. It is a form of debt consolidation but only from your viewpoint.
Debt management companies can either be for profit or non-profit, but they are not free. Even non-profits have overhead expenses. Often they will attempt to negotiate better interest rates or lower finance charges with creditors, using their relative stability as leverage.
1. Basing your spending decisions on your bank account balance
If you don’t have a detailed plan for your money, life can get extremely stressful when big bills come in. With a bit of planning and having a buffer fund for the expected and unexpected bills, this will make it easier to avoid financial stress.
2. Lack of “Cash Management System”
Setting up a CMS or detailed budget for planning your income and expenses is a vital part of reducing debt.
Not only does it make dealing with your finances easier, it helps you realize the more organized you are with your money, the more you seem to have. A CMS is vital to success.
Cash management is the corporate process of collecting and managing cash, as well as using it for short-term investing. It is a key component of a company’s financial stability and solvency. Corporate treasurers or business managers are frequently responsible for overall cash management and related responsibilities to remain solvent.
Cash management is the treasury function of a business, responsible for achieving optimal efficiency in two key areas: receivables, which is cash coming in, and payables, which is cash going out.
Receivables Cash Management
When a business issues an invoice it is reported as a receivable, which is cash earned, but not yet to be received. Depending on the terms of the invoice, the business may have to wait 30, 60 or 90 days for the cash to be received. It is common for a business to report increasing sales, yet still run into a cash crunch because of slow or poorly managed receivables. There are a number of things a business can do to accelerate its receivables and reduce payment float, including clarifying billing terms with customers, using an automated billing service to bill customers immediately, using electronic payment processing through a bank to collect payments, and staying on top of collections with a receivables aging report.
Payables Cash Management
When a business controls its payables, it can better control its cash flow. By improving the overall efficiency of the payables process, a business can reduce costs and keep more cash working in the business. Payables management solutions, such as electronic payment processing, direct payroll deposit and controlled disbursement, can streamline and automate the payable functions.
Most of the receivables and payables management functions can be automated using business banking solutions. The digital age has opened up opportunities for smaller businesses to access the same large-scale cash management technologies used by bigger companies. The cost savings generated from more efficient cash management techniques easily offsets the costs. More important, management will be able to reallocate precious resources to growing the business
3. Getting wrong advices
Often family and friends in their effort to protect you from making mistakes, can give you the wrong advice which can hold you back for years. Before you take someone’s advice, look at who they are and what they have and if that’s where you want to be, then take their advice. Remember, banks make profits by setting things up to suit their plan not yours.
4. Avoiding credit cards
Credit cards are a bit like fast cars. If driven recklessly, a fast car is dangerous, but driven properly it isn’t. Just like a fast car, there is nothing wrong with a credit card, if treated correctly. Credit cards are actually a great tool in money management as long as you can pay them out each month and pay no interest.
Credit Card Myths
5. Falling for the ‘interest-free’ trap
Most people, who have fallen for the interest free credit marketing ploy, have done it for one of two reasons. Either they want the item now and can’t pay for it – not a great idea – or they think they should leave their money in their account and believe they will pay it off during the interest free term – most don’t. Remember, by paying for the item with cash, you will usually save money anyway.
If you have the commitment to make payments even if you don’t have the money, then interest free deals can work for you. It would be a great way to take home the things you need then and there and pay later.
Yet, if you did the same, made only the minimum repayment each month, then after the interest free period you would likely be charged around 30% interest on the amount remaining. That is a LOT of interest and will very likely cause you to become stressed about having more debt.
6. Debt consolidation
Debt consolidation, if treated correctly, can be an awesome way to manage your debts and save a bucket-load of interest. But if you constantly consolidate and then get back into consumer debt, all you will be doing is continually eating your equity.
How does debt consolidation work?
There are two primary ways to consolidate debt, both of which concentrate your debt payments into one monthly bill:
Two additional ways to consolidate debt are taking out a home equity loan or 401(k) loan. However, these two options involve risk — to your home or your retirement. In any case, the best option for you depends on your credit score and profile, as well as your debt-to-income ratio.
7. Choosing the wrong loan
The biggest dilemma most people face is deciding what type of loan and whether to go fixed or variable. There are many options available but it is vital you receive the right advice to suit your situation. I normally choose variable, and I always choose Interest Only – and pay extra, which seems to work effectively with debt reduction strategies.
8. Combining your personal and investment accounts
They don’t keep their personal and investment money separate. The key to successful investing, and stress-free living is to keep these sides quite separate from each other.
9. Believing that your home loan is a ‘long term ‘debt
Most people assume a home loan is a stone around your neck for 25 years. Best case, by paying weekly or fortnightly you might pay it out in 17. What most people don’t know is that, handled correctly, a mortgage should be paid off in only five to seven years, just by doing your banking differently.
The biggest mistake of all is procrastination. If you like your current financial situation, then do something about it. Think about your situation this last year and this time the year before.
How to Overcome Procrastination
As with most habits, it is possible to overcome procrastination. Follow the steps below to help you to deal with and prevent procrastination:
Step 1: Recognize That You’re Procrastinating
Step 2: Work Out WHY You’re Procrastinating
Step 3: Adopt Anti-Procrastination Strategies
Strategies to help you get organized
This will prevent you from “conveniently” forgetting about those unpleasant or overwhelming tasks.
This will enable you to quickly identify the activities that you should focus on, as well as the ones you can ignore.
If you have a big project or multiple projects on the go and you don’t know where to start, these tools can help you to plan your time effectively, and reduce your stress levels.
Identify when you’re most effective, and do the tasks that you find most difficult at these times.
Setting yourself specific deadlines to complete tasks will keep you on track to achieve your goals, and will mean that you have no time for procrastination!