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Josh Billings
Debt Management
What is debt management ?
Debt management is nothing but a plan to get your debts under control.
interest costs.
Maximize
underwriter.
Seek
Review
guidance of the
GFON.
FORMULATED VIEW
Principal = borrowed money. Interest = the amount you pay on principal (borrowed money).
Interest = Principal x Interest Rate x Time
debt. debt.
Chronic Life
change debt.
Acute debt
Acute debt is a situation in which the client has negative cash flows and unable to repay the debts though he has enough assets to cover his liabilities or positive net worth.
REASONS LEADING TO THIS SITUATION:
Lower term of repayment or highly monthly payment. Reduction in income. Increase in expenses. Increase in interest rates.
Chronic Debt
This is a long term situation. Though they have cash flow, they need to make immediate repayments. He will be having a negative net worth which can lead him to life change debt situation. REASONS LEADING TO THIS SITUATION:
Highly unsecured loans like personal and credit card. Loan of value of investment assets.
Higher cost of debt when there was opportunity for getting low cost debt.
30% 20%
10% 0%
23% 4% 3% 6%
15%
4%
Severe Anxiety
Which of the following illnesses and other health problems, if any, have you had in the past 12 months?
Want
Desire
To tell time:
Use free available An inexpensive clocks watch--Timex
Transportatio n:
Use public transportation Used car New carRolls Royce
Opportunity Costs is the cost of passing up the next best choice when making a decision.
The purpose of this example is to point out how a shift from spending on wants and desires to spending on needs and then saving and investing the difference can have a profound I Your values determine your perception of needs, wants and desires. Everyone has different values.
gathering. Analyzing the current financial position. Classifying the current situation. Determining the strategies. Implementation.
Guiding Principles
Borrowing
for operating expenditures is generally unsound Borrowing for capital projects is considered essential financial decision-making Borrowing for capital projects requires effective debt management
Borrow as little money possible at the lowest interest rate possible and for the shortest timeframe possible. Live within your means. Establish an emergency fund to avoid debte.g. $1,000 then 3-6 months expenses and then 6-9 months expenses. Practice delayed gratification save for items and pay cash. Credit cardspay the balance off in full each month or consider canceling the cards in order to control your deficit spending. Understand the difference between Good Debt helps to build your future net worthand Bad Debtdiminishes your future net worth.
A debt management plan will last as long as it takes to pay off all of your debt. For this reason, the key to success is to pay as much as you can each month so your debt is paid as fast as possible.
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