Extravagant living, fancy holidays and lavish lifestyles is truly something all of us wish we could have, after all it is only human to want more. However, we need to be realistic here! If we are not making enough to pay our bills or trying to steer clear of existing debts than fantasizing about the newest, fancy condo in Damansara Heights is not really going to solve it, is it?
The fact is – most of us at one point in our life will be hit with a debt crisis we all need to settle. Be it from education loans, to credit card loans, personal loans, car loans or even housing loans – eventually we all end up in some kind of debt.
Fortunately for you, there is a sure-fire way of clearing-off unwanted debts and amplifying your savings. Well of course, everyone has to start somewhere, and if you work hard at it, you bet, your debts are bound to decrease and your financial situation will improve in no time.
So get your pen and notes ready as we would like to introduce you to:
Fulfilling Your Financial Goals Part 1: How To Get Out Of Debt SMART-ly
Financial goals are sort of the granddaddy of all broken promises. If they are anything like New Year’s resolutions, then by the second week of January, 75% of you would have abandoned whatever pledges you made. And by the last week of December, only a measly 8% of our civilization would persevere to actually realize all their resolutions.
One such financial goal that often suffer catastrophic failure is the pledge to get oneself out of debt, and they come in various forms:
“I want to pay off my credit card debts.”
“I want to shorten my housing loan period.”
These goals – all motherhood statements – are vague at best and is only meant to make you, the person who makes them, feel good. When you make such ambiguous goals and stop there, you are simply setting yourself up for failure because the strategy to execute them is missing. In other words, your goal to be free of debt needs to be Specific, Measurable, Achievable, Realistic and Time-bound (SMART).
Specific: I want to pay off my credit card debts is not specific enough. How much more than the minimum monthly payment do you intend to fork out?
Example: I will pay RM100 more than the minimum monthly payment to clear my credit card debt.
Measurable: In order for your goal to be measurable, you will need to be able to track your financial progress, only than you will know if you are making headway towards the financial goal.
Example: I will clear my credit card debt in 9 months and during this time, I will refrain from swiping my credit card.
Achievable: You need to be sure that your goals are achievable. For this to work, be sure what you are looking to do is really within your ability and means and is achievable in the long run.
Example: Deciding to reduce your 30-year housing loan to just 5 years is absurd if your salary stays the same. However, slashing your loan period to 15 years by cutting some bad spending habits and using the extra cash, as well as your yearly bonuses or tax refunds to pay off the loan will sound more attainable.
Relevant: Consider is the resolution relevant to your personal vision? Is getting out of debt aligned to your vision of providing financial wellbeing for yourself and your family?
Example: Once you are debt-free of credit cards, you will be able to protect your financial health, and that of your wife and children. Moreover, by spending less and using your tax refunds, bonuses and extra savings to shorten your housing loan period, it will help you clear your housing debt sooner than you expect.
Time-Bound: Time is necessary to make your goal measurable. A well-planned timeframe will help you determine, if you have sufficient time to achieve your goal.
Example: By committing to pay RM100 for the next 9 months to clear your credit card debt, you will be debt free by the end of the 9 month-period. There it is, by making your goal time-bound, you will allow yourself a framework to focus on and in time you will be able to achieve your desired goal.
Do you see? It is that simple! When you begin to understand precisely how you intend to be debt-free, the chances of financial success is promising. And never again will you be riddled with guilt over unfulfilled financial goals.
The Bottom Line…
Getting yourself rid of debt is important as it gives you a peace of mind, helps expand your financial options and improve your quality of life. So start clearing your debt the SMART way!
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