11 easy steps to get out and stay out of debt

In spite of steady, regular income there are so many individuals who live paycheck to pay-check  carry their credit card outstanding, and fail to save anything for life after retirement. If you are one of them, now is the right time to take action to come out and stay out of debt.

It is not only possible but also very much achievable.

Discussed below are a few easy steps you can use to get out of debt:

1. Make a list of all your debts

You need to take a good look at all your loans. It could be credit card dues, personal loan, car loan, housing loan, education loan, loan from FD, loan from insurance policies, loan from your employer, hand loan, and so on. For each and every loan you need to note down basic details like how much you owe, the current interest rate, EMI amount, number of months (tenure) etc.

2. Negotiate for lower interest rates

If you could negotiate the interest rate and bring it down, you can come out of debt faster. Most of the credit card companies come forward for negotiation if you show interest in repaying. They need not run after you to collect the debt. They will be happy to negotiate as this will, in fact, reduce their expenses. Balance transfer offers from credit cards are also a good way to reduce your interest rate.

3. Refinancing and consolidation

Replacing a loan with another is known as refinancing. Getting a refinance should reduce your interest rate and bring down the time you are in debt. But people more often go for a refinancing option  that provides them with lower EMIs, increasing, however, the time they stay in debt.

4. Categorise your debt

A house loan can increase your net worth over a period of time. This kind of loan gives you tax benefit also. For a businessman, car loan provides some tax benefit. Each one of your debts needs to be categorised based on such factors. This will help us in comparing different loans.

5. Prioritise your debts

After sorting out various loans, you can comfortably prioritise them. This will be based on the interest rates and tax benefits. At times paying off a small loan first can give you a lot of motivation to get out of your overall debt.

6. Creating and executing a debt payoff plan

You need to create a debt payoff plan with different scenarios, so that you can find out how some more savings or a different repayment order will help you to get out of debt faster. When creating a plan, you need to choose one which is comfortable to your attitude. Otherwise, you may not be able to execute it properly.

7. Keep yourself from taking fresh loans

You need to make a vow that you will not be adding any fresh loans until you come out of all your debts completely. Think, for a moment, how you will feel when you become debt free as this will give you a lot of positive energy to come out and stay out of debt.

8. Postpone buying major assets

Buying property or any other major asset needs to be postponed until you get rid of your debt. With your new ownership comes the new - probably large - and unpredictable expense. This can make you deviate from your debt payoff plan and, at times, make you bear unpleasant and uncontrollable consequences.

9. Stop using your credit card

When it comes to using credit cards, there are broadly two kinds of people: 1) who use credit cards responsibly; and 2) who don't. Poeple of the responsible kind repay their credit card dues in full on receiving the bill. The other kind, however, would pay the minimum due amount and carry forward the remaining sum.

If you belong to the second group, you need to stop using credit cards - at least - temporarily. Take out and put your credit cards in a locker. You can start using them again once your financial situation and buying habits improve.

10. Change your spending habits

Being in debt obviously means that you have been living beyond your means. The solution is very simple: spend less and you will get out of all your debt soon. You need to change your spending habits. If you buy things you don't need, you soon end up selling things that you do need. Don't save what is left after spending; instead, spend what is left after saving.

11. Involve your family members

You need to inform all your family members and dependents about your debt status. This way, you will be able to take decisions with much more clarity. Moreover, if your family members know about your debt, they will also change their spending habits and support you in getting out of debt faster.

Consider the example of a postage stamp. The usefulness of a postage stamp lies in the fact that it sticks to one thing till it reaches its destination. Similarly, you need to stick to your debt pay off plan till you get out of it.

Courtesy: K. Ramalingam is a certified financial planner of Holistic Investment Planners

http://profit.ndtv.com/news/your-money/article-11-easy-steps-to-get-out-and-stay-out-of-debt-325166?pfrom=home-business

One habit you should avoid to get richer

Mental accounting is a common money mistake which even smart people commit. Understanding this mistake and avoiding this could prove to be very beneficial.

Behavioural finance experts say that mental accounting works this way: Let us say you have bought a Rs.200 ticket to a movie, but when you show up at the entrance of the theatre you realize that your ticket is lost, do you buy another ticket?

If you are like most people, you would probably think twice. You may still drop down the money, but you will now feel that you paid Rs.400 for Rs.200 movie.

Now let us construct the scenario differently. Let us say you had not bought the ticket yet, and you show up at the entrance to buy your ticket. Then you realize that you have lost Rs. 200 cash since you walked from the parking place, but fortunately, you still have enough in your wallet to cover the cost of the ticket. Do you buy the ticket now? Again, if you are like most people, you may feel upset about the lost money, but it probably would not affect your decision to buy the ticket. Why?

Behavioural finance experts conducted similar experiments. They found that 46 per cent of those who lost the ticket were willing to buy a replacement ticket. On the other hand, 88 per cent of those who lost an equivalent amount of cash were willing to buy a ticket.

Both scenarios are a loss of Rs. 200. However, in the second scenario you separate the loss of the Rs. 200 from the purchasing of the ticket. In the first you consider the cost of the movie as a total of Rs.400 and suffer at the high cost.

This happens because of the psychological phenomenon known as mental accounting.

One of the fundamental concepts in economics says that wealth in general and money in particular, should be fungible.

Fungibility, in a nutshell, means that Rs. 100 in lottery winning, Rs. 100 in salary and Rs.100 tax refund should have the same significance and value to you since each Rs.100 has the same purchasing power at the market. But do you treat them in a similar way?

Mental accounting has enormous consequences in your daily life. It affects how you spend money and how you save. It influences how you deal with losses and windfall gains.

1. How does mental accounting affect you?

The source of the money affects how it is spent.

You tend to dine lavishly with the "gift meal vouchers" given by your company. But you will be dining consciously if you are paying out of your salary.

You are most likely to spend more with credit cards than with cash.

You may consider tax refund as "free money". In actual terms it is your own money. You will not spend tax refunds, birthday gift money or lottery winnings on essential things like utility bills, school fees, paying off your credit card debt. But you will be more than happy to spend the same money on discretionary items such as vacations or a trendy mobile phone.

2. Do not be a victim of 'relative cost'

Assume you are going to a super market to buy a laptop whose price is Rs.40,000. But then you get to know that there is another branch of the supermarket, on ten minutes walking distance in which the same laptop is sold for Rs.39950. Will you walk down to the other branch?

Let us say, instead of buying a laptop you have planned to buy a memory card. The price at the supermarket is Rs.100 and at the other branch is Rs.50. Where will you buy the card?

Most of us will make a trip to the other branch for the memory card but not for the laptop. Because we think that the Rs.50 saved on a Rs.100 item is better than the same amount saved on a Rs.40000 item.

But both situations are the same, as you save Rs.50 by walking ten minutes

Remember that money is money, Rs.50 saved on Rs.40000 laptop is not less money than Rs. 50 saved on Rs.100 memory card.

3. How to face mental accounting and spend consciously?

You can use mental accounting to your advantage by spending money out of your salary. Immediately invest the "free money" like tax refunds, gifted money or any other windfall gains.

Imagine that all income is earned income.

Use the free meal vouchers and other gift vouchers to buy essential items.

Pretend you don't have a credit card. I am not telling you not to use credit cards. I am saying you should stop and think: would I buy this if I was using cash?

4. A successful practical strategy:

You can have two bank accounts, one for the purpose of savings and the other one for spending. Every month you need to set aside some amount for expenses as per your budget or previous experience, and transfer it to your spending account. The balance amount should be kept in savings account.

You need to meet all your expenses including your credit card payment from the spending account. You should not spend from your savings account.

In between, if you receive any cash gifts or windfall gains, deposit them in your savings account. If you receive gift vouchers, then transfer the money equivalent of that voucher from your spending account to your saving account. That is your spending limit will not go up by just receiving the gift voucher. So, you will not use it lavishly and use it only on pre-planned things.

When it comes to money your mind unconsciously plays this trick of mental accounting. You have understood that today. So hereafter, you can avoid this mistake and manage money in a better way.

Courtesy: K. Ramalingam is the chief financial planner at Holistic Investment Planners

http://profit.ndtv.com/news/your-money/article-one-habit-you-should-avoid-to-get-richer-325179?pfrom=home-business

Seamless Journey to Thailand

After giving a great thought on where to plan our holiday, we finally set on a trip to Thailand. All of 3 days and 2 nights in Bangkok and Pattaya, the trip was  fun all the way and well within our budget as well. It was made convenient for the fact that we had booked everything in advance. 

Day 1:

    Upon our arrival at Don Meuang, Bangkok at 3.10 we checked into a feel-at home - Phurahong Homestay (a half an hour drive from the airport) to get refreshed. Set off to our first spot at 8.30 am. 

1. Safari World:-

             Safari World,  one of Thailand's greatest open zoo and leisure park offers a great variety of entertainment. Whether it the exciting safari drive through the picturesque African wilderness with majestic Lions and Tigers at touching distance, an intimate encounter with the friendly Dolphins or an exhilarating fast-paced action stunt of the western cowboys, Safari World has it all. Price - 1450 THB (incl. Thai buffet lunch and hotel transfer).       

After these spectacle, we headed to Pattaya at around 4 pm. The drive is probably around 2 hours. Just about entering Pattaya, we made a visit to the Gems Gallery, the world’s biggest jewellery store. 

2. Gems Gallery:-

         You can witness the “Theme Park – Dark Ride” which is all know-how. A fully computerized bogey ride into a man-made tunnel shows a spectacular presentation of the glittering world of gems. The show features the process involved in the making of precious jewellery.  Unlike many other tourist attractions in Pattaya, there is no entry fee associated with the Gems Gallery. A must-see place to visit just for its grandeur elegance and the experience it offers. You can spend an afternoon without it costing anything unless you are tempted to purchase any jewellery which is bound happen with the excellent assortment of gems and jewellery at display. The welcome is both warm and comfortable, and you feel an inviting presence from the moment you visit this attraction. 

Lodged in Sawasdee Sabai for the night. A wak across the streets was nice. Dining wasnt any trouble with McD, KFC, Burger King all around. And there's always the ubiquitious 7 Eleven. 

Day 2:-

         Left the Hotel at 8 am and arrived at the shores of Pattaya.  

# Coral Island:-

             Upon arrival, a one hour trip takes you to the blue waters of Koh Larn - an idyllic island located just west of Pattaya which makes a perfect day-trip. Widely known as Coral Island, you can spend the day swimming, snorkelling and sunbathing. And not to mention the fun of water sports which can really make your day more worthwhile - Para-sailing  Under Sea Walking and Jet-ski  all at affordable prices. You can certainly enjoy the abundant coral and underwater world at leisure at one of the most beautiful beaches around the world. Price: 550 THB (incl. of lunch and Hotel transfer)

Parasailing - 500 THB; Under Sea Walk - 1200 THB (additional 150 THB for a set of photos)

Jetski - 350 THB

Day 3:-

          Left for the last spot of our trip at 9 am.

1. Sriracha Tiger Zoo:- 

         Located about 35 KMS from Pattaya is the biggest zoo of its kind in the entire world. The zoo boasts of the largest number of Bengal tigers, bred successfully by the farm itself. Besides, the zoo has crocodiles, ostriches, single hump camels, and an aviary of exotic birds. Exciting shows are Tiger taming, Crocodile wrestling, Scorpion Queen, Amazing Circus and Pig Racing. All of 550 THB (incl. hotel transfer).
You do get to take a pic sitting next to a gaint Tiger after-all - 100THB 

2. MBK Mall:-

       En-route to the airport, we dropped into this mall at Bangkok for purchases at around 12 pm. Electronics, apparels, Souvenirs,  Cosmetics and what not. You can find it all at reasonable prices.  And of course you can bargain as well. A good 3 hours would do before setting off to the airport which is a one hour drive.

You can always choose to take the local transport for your trip between Bangkok and Pattaya but if at all you feel like a having a personal vehicle for your group, I may suggest Eddy - Thailandvoyage [eddy@thailandvoyage.com/ +6686-00221100 ]. 

- DC