Have you heard about the Chakravuyhah, a war strategy from the Mahabharata? Itâ€™s a war technique into which the opponent is lured in easily. However, breaking out of it is quite another story. Even the skilled warriors failed miserably when escaping from the Charkravuyhah.
You can equate the Chakravuyhah, with debts. Falling into debts is easy while climbing out of it is a task of Herculean levels. The major culprit for a debt trap is the lack of financial planning.
Here are some thumb rules, to help you live a life free from debts.
Loans should be handled with Caution
Just because, loans are easily available in todayâ€™s scenario, it doesnâ€™t mean that you should avail all that you can. The thumb rule is: Donâ€™t let your total EMI exceed 45% of your take-home pay/income. While secured loans like home loans reflect positively in your portfolio, unsecured loans like fast personal loans drag you back. So, ensure that you pay off unsecured loans first.
Credit Cards â€“ The Plastic Key to Debts
They are undoubtedly the biggest contributors to your overall debt. Credit cards give the illusion that youâ€™re spending without paying. But, you must remember that credit cards are just like loans and even a delay of a few days can lead your interest to pile up. So, remember that you must practice strict financial discipline while using credit cards.
Donâ€™t borrow to meet your Luxury Needs
A few years back, borrowing to go on a vacation or to get the latest gadget was unheard of. With the increase in the availability of quick personal loans, more and more people are availing loans to meet their luxury needs. This is the easiest way to slip into a debt trap. Once, you borrow for luxuries, the amount of money you have to meet your basic needs and emergencies become limited.
Build an Emergency Fund
At any point in time, you should have an emergency fund roughly equal to at least six months of your salary. This contingency fund should be used only during emergencies and not for any other purposes. This fund will eliminate the need to borrow money at exorbitant rates in times of emergency.
Donâ€™t rely on your Family and Friends to pull you out of the Debt Trap
No matter how close youâ€™re with your friends and family, itâ€™s your sole responsibility to meet your financial needs. Instead of souring relationships by asking your friends to bail you out every time, try to inculcate the habit of being self-reliant.
Use your Mind and not your Heart
Above all, when it comes to financial decisions and planning, always trust your mind and not the heart. Donâ€™t let your emotions rule you. Instead, take a step back and plan logically to have a sound personal financial planning. Also, itâ€™s a good idea to practice ways to improve your cibil score, so that your credit rating is high.
Follow these simple rules to avoid debt traps forever. If at all, you find yourself sinking into a debt hole, donâ€™t hesitate to seek the help of a credit counseling agency to help you get back on track. You can also avail credit counseling from www.antworksmoney.com to steer clear of debt trap.