How to overcome financial weight and financial drag

  

Date Posted: 3/27/2013 1:22:09 PM

Posted By: florewan  Membership Level: Silver  Total Points: 949

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HOW TO OVERCOME FINANCIAL WEIGHT AND FINANCIAL DRAG

Financial weight:
Too much debt: A ratio more than 35% (total value of assets to total liabilities) begins to work with financial gravity to take you down. If you are at this level or beyond, the first thing to do is to stop going into any further debt. Use any extra cash you have for this purpose; increase your regular repayments to whittle it down faster. Negotiate a repayment reschedule that gives you some room to breathe. Go ahead and sell an asset if that is what it will mean to give you lift.
Too much car: When buying a car, fuel efficiency and engine capacity do not feature very highly in the buying decisions of many. Bigger and more powerful cars have been the main attraction. But with the way fuel prices have escalated over the last year, you can no longer ignore the fact that your car may just be driving your finances in the wrong direction. Take a thorough look at what it’s costing you to keep your wheels on the road i.e. fuel cost, insurance and maintenance and make that tough call if you have to. You can also reduce your vehicle’s fuel consumption by making sure your car is serviced regularly and your tires are properly aligned, balanced and inflated.
Too much house: A larger house requires more electricity, more maintenance, more water, more furniture, fittings, accessories and more rent / mortgage money. Rationalize how much accommodation space you actually need and downsize in order to save costs.
Too much school: While providing education to our children is important, there is a chance we are going overboard with what we are paying to do this. If it turns out to be a struggle settling these fees, especially if the kids are in

lower levels of kindergarten and primary school, then you may have overstretched yourself.

Financial drag:
Spiraling consumption: With tens of billions of shillings being spent each year on marketing of products and services, you are under constant pressure and enticement to spend more and more on consumption. We are continually purchasing new things, then things to keep these things in, and even more things to keep track of all these things. This vicious cycles is what keeps a large portion of national economies afloat, while giving you financial drag that could slow you down to a stall. Learn to want less and practice contentment. You don’t need all those things.
Impulsive spending: Operating without a spending plan is a huge financial drag on you. Plenty of your money ends up going towards things other than what takes you forward. It gradually becomes a habit which is hard to shake off and can lead you to consistently spending more than you earn. Determine in advance what you will spend your money on, then develop the financial discipline to stick to the plan. Conduct a monthly analysis on your spending and highlight where you have exceeded. If you have failed to accomplish some of your goals because of low savings, then it will encourage you to stick to your financial plan.
Expensive debt: Credit card debt, borrowing from shylocks and emergency loans are all expensive debts that you would not like to find yourself into. There are three common denominators with these forms of debt;
• They are commonly taken to cover for shortfalls resulting from spending beyond available means.
• They carry with them heavy interest rates.
• They are fairly easy to obtain.
Interest rates could be as ridiculously high as 360% per annum as in the case of loans from shylocks. These rates and flexible repayment terms then ensure that you easily become ensnared and carry such debt around as financial drag. Spend less than you earn and plan to build an emergency reserve to cater for a real emergency that may arise.

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