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Are You Taking a Proactive Approach to Your Debt?

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Are You Taking a Proactive Approach to Your Debt?

I recently organised and attended a presentation by a respected financial planner who certainly didn’t paint a rosy picture of the near future.

It was a sobering reality check for me, an eternal optimist, who, at the age of 62 still has my mother’s ‘it will all work out’ and ‘something always turns up in time’ words ringing in my ears.

When I was in my 20’s and early 30’s the buzz was all about planning to retire at 55. Our investment in superannuation was going to enable us. The Government of the day was supportive of this philosophy. It made sense that we ‘Baby Boomers’ should retire early and let the younger generations ‘move up the ladder’.

Yet, here we are thirty something years later, not able to fully retire and our Government is now encouraging us to stay in the workforce longer.

What’s changed? The sudden realisation that such a mass exodus from the workforce is not affordable? Recognition that we can’t afford to lose all those funds out of the superannuation bucket at once? Or something else? It could be any, all or none of these.

How will you ‘get through it’? How are you going to be able to manage your overwhelming debt until ‘it all works out’ or ‘something turns up’? As my financial planner friend pointed out, our circumstances are all different and right now, more than ever before, you should seek professional advice.

Here are a couple of ideas to help you start thinking proactively.

Pause to re-evaluate.

The first step is to take a realistic view of your current position and lifetime goals. What is your real likelihood of achieving what you’d hoped to achieve? Reset, if necessary.

Personally, we have property investments. If we sell now, we’ll surely be reliant on the pension and may just have enough surplus to own a modest home outright. If we wait, and the market doesn’t recover, or interest rates rise significantly, we may end up with even less. For the moment, we’ve opted to remain optimistic and are willing to take the risk and wait it out.

To do this takes fortitude and total detachment from the outcome. We’ve made the decision; we must own it. We won’t go looking for excuses or someone else to blame. That won’t get us to financial freedom any earlier. Once you’ve made a decision, own it.

Review your current personal and business debt – line by line.

Look at every debt, every commitment with a whole new perspective. How can you either reduce, delay or eliminate it?

  • School fees.

We opted to send our kids to private secondary schools.  During those years we were involved with three different secondary schools, and our finances fluctuated. One school was particularly unforgiving, lacked compassion and more or less said ‘pay up or get out’. The other two were wonderful, and we were able to negotiate delayed payment and repayment plans to help us.

  • Mortgage debt.

All financial institutions have an application process for financial hardship that, if approved, could give you three months repayment relief. It’s not a reprieve from the debt, and the interest continues to accumulate, but it can certainly assist you through a tough time. We took advantage of this a few years ago when we were hit with a double whammy of job loss and medical expenses.

  • Phone/Internet service.

Your phone/internet service provider may not tell you if you can pay less for the current service you are receiving. Review your plans at least every 12 months. We reduced ours by more than $1200 per year and increased our data in the process.

  • Exchange your debt for services and vice versa.

Some of your smaller creditors may be willing and in a position, to use your services to the value of your debt. This equally works well the other way. If someone owes you money and they are struggling to pay, you may be able to use their services to recover the debt in kind. ‘You don’t ask; you don’t get’ is my mantra. You have nothing to lose but a bit of pride by asking for what you want.

Managing personal and business debt can be overwhelming. Look for options to take the pressure off and allow yourself to hang in there a little longer. Making it through to the other side as the victor boosts confidence in your ability to manage finances now and for your future.

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