As the cliché goes, money makes the world go round. Consumerism has never been as vibrant as today when everything can just be had at the mere swiping of an electronic card or at the click of your mouse. When financial matters are the least of your worries, everything seems to be within reach and affordable from the barest essentials down to your items of luxury. Or you are living on a budget but the sight of that sexy and trendy top is just enough to send you running into the store and buy it. But at the end of the day, there is that nagging feeling that you have exceeded your spending limits, and just threw your budget out the window.
A worst case scenario is when you’ve maxed-out your credit cards due to relentless spending that could have otherwise been paid out in cash, and failing to pay your credit card bills for any reason. The credit card craze is global and has permeated even third world countries whose credit standing is further shaken by bad debt performance. In the U.S., data shows that total credit card debt has reached up to $785 billion, which translates to a credit card liability of more than $8,000 for an average American. In the U.K., total consumer credit card debt in April 2006 has reached £56.0 billion. Figures show that the debt has continued to increase at the rate of 7.3% for the past 12 months.
Such staggering figures would surely leave us asking ourselves how we have contributed so much to it, but one thing is for sure, that it has a lot to do with the way we handle our personal finances.
Working With Our Personal Finances
Unburdening ourselves from financial worries starts from self-discipline. The rule to live by is very simple: if you spend more than you can afford, you lose more than you can afford to lose. We need to take control of our finances, and what better way to do it than by having a working knowledge of how to handle common personal financial problems such as credit card debts, personal loans, and bankruptcy.
Credit cards. Credit cards store identification information of the cardholder, and empower such cardholder to charge to his credit account his purchases made or services engaged. Every item charged is billed to the cardholder periodically. Using your credit cards is literally spending more than you can afford because most often than not, we do the swiping when we have ran out of cash. Raking up a debt when you have no money on hand translates to bigger liabilities as against assets. Take the necessary precautions even before you apply for a credit card. Know first what are the fees and costs associated with the use of your credit card. Take the extra time to look out for those credit card companies that offer the lowest interest rates. Resist the temptation to take out cash advances because higher interest rates usually apply. And lastly, always pay more than the required minimum amount to avoid recurring high interest rates.
Personal loans. In simple terms, a personal loan is a loan of money that is extended by a financing company to an individual. It is the means usually resorted to by the borrower to give a stop-gap solution for a temporary financial problem such as payment for electric bills, credit card monthly bills, or other necessities. Most personal loans are unsecured by any collateral so they command higher interest rates. A homeowner may use his or her house as security for a personal loan, in which case it becomes a secured loan.
If you plan to take out a personal loan, make sure that you have enough financial resources to be able to keep up with your payments regularly. This is an even more important consideration when you are taking out a loan on top of your other unpaid loans. Anticipate the worst-case scenario of unemployment or serious illness when measuring up your capability to return the money.
Bankruptcy. A person who owes one or several debts to another, and has no sufficient finances to pay debts as they fall due, may apply for personal bankruptcy. The purpose is to use your remaining assets, income, or earnings received and apply it for the lump sum or installment payment of debts due. While bankruptcy does not hinder you from seeking a new employment or other livelihood options, a bankruptcy record will remain on a person’s credit report for up to several years. It creates a disputable presumption among creditors or lending institutions that a person who has filed for personal bankruptcy is a high-credit risk. They may use this as a justification not to grant credit or extend one on lesser terms. If you are in dire financial standing, seek other alternatives before opting to file for bankruptcy. Try to negotiate directly with your creditors for lighter and manageable monthly payments, or even for a partial condonation of your debt. If there are no other options available, make sure that you get expert professional help, such as credit counselors and lawyers with experience in personal bankruptcy cases. Bankruptcy involves complicated legal procedures, documents and applications, so it would be best to resolve it with people who can best represent your interest.