Tuesday, July 25, 2006

Debt disaster planning

by Sidney Winthrop


Debt disaster planning

Your financial comfort zone is that level of debt where you don't worry about your debts because they are easily managed and cause you no worries. If you are carrying a heavy debt load your debts will weigh you down and give you concerns even though you can manage to pay the bills each month.

If you have a secure, reliable income your comfort zone will be higher than if your income is insecure and less reliable. Your debts may seem to be manageable but that does depend on everything staying the same. Unfortunately very few things do stay the same. It is one of the few certainties in life, things will change. So how ready are you to cope with change in your financial circumstances?

The greatest fear for most people is of losing their job through ill health or redundancy. It may seem that it's ok to be spending like a drunk in a bar when you have a job but, if that job were to disappear how long would you survive? The closer you live to the edge then the easier it would be to slip over that precipice.

Your credit rating would be damaged straight away so your interest rates could rise. All this at the same time as your income has come to a standstill. Think about that. If you had no money coming in, how long could you keep up the repayments? The debts aren't linked to the job and will still need to be paid even after the job has gone.

Disaster is always unexpected, accidents by their nature are accidental and unexpected. The emergency services cannot know exactly when and what they will be needed for but they still plan. They make plans for various scenarios and then adapt the plan to suit the circumstances. You should do the same with your financial planning. You can't know what might trip you up but you can plan to deal with possible changes.

Examine your financial situation. Consider the possibilities for reducing your debts using debt reduction strategies. Look at what you are spending your money on and consider if it really is vital to have all those gadgets and gizmo's, the new dress or to spend quite so much money eating out in restaurants. You don't have to live like a pauper but trying to live like a millionaire will probably mean you will never become one.

The days of the "Job For Life" are long gone. We have to adapt to survive and burying your head in the sand is not a survival strategy. It will merely expose your rump for others to feed on. Wise up and wake up, it really could happen to you. Get control of your finances manage your debts and debt levels and be prepared for any eventuality. You will have your plan to fall back on and be able to adapt it to your new circumstances.

The author, Sidney Winthrop specialises in articles about personal finance and debt reduction. More information can be found at http://www.moneywell.co.uk

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1 Comments:

At 2:27 PM, Blogger Paul Maclauchlan said...

The best thing a person can do to implement Debt Disaster Planning is to create multiple streams of income for themselves! Having a job is great... but not having to depend on someone else for a living wage is even better!

For information on the benefits of having multiple streams of income, I encourage you to visit my No Limit Success Blog.

Wishing you no debt and many days on the beach .../Paul

 

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