Monday, January 25, 2010

The basics of reaching financial freedom

As a child, I recall my carefree days where everything was laid out in front of me and I never had to think of tomorrow, knowing my parents would always be there for me. As the years go by and as I step into school and finally get into a university, everyday is a day closer to entering the working world and learning to earn my own money as well as budget all my expenses to save money for a rainy day. I can choose to live from day to day without any personal financial goals or I can set targets to plan my budget and retire happily in the future. In the case of the latter, the area of personal finance is extremely crucial. I would need to draw out a proper budget and have good debt management especially for my credit card spending.

In my opinion, we are naturally prone to impulsive spending and owning a credit card makes it even easier. We tend to overspend and buy items which catch our attention without second thought if we could actually really afford it or if it is within our budget. With just a swipe of the credit card, the deal is through, the items are ours but a bill waits at the end of each month. This is the time when we have to fork up the real cash and pay for what we have bought earlier. At this point, most people realized they have overspent but it is too late and delaying the payments will cause debts to pile up and eat into all your savings. This is why debt management is important where you must ensure you borrow an amount is within your affordability to repay.

Initially, it may seem such a hassle to curb spending and be deprived from things that you wish to own. However, delayed satisfaction will be worth not only your time and money, but your whole future. If you can stay debt free from the very beginning and spend within your budget, a time will come when you can afford everything you have wished to own before this. Therefore, debt management is crucial as falling into the debt trap is a vicious cycle where all your savings will go into paying the debt and high interests.

If you find yourself stuck in paying high credit card bills beyond your salary and have no savings, it is indeed time for debt management. The very basic step to take is to simply stop buying things you never actually need. It is never too early to start planning your budget, as it is a stepping stone to financial freedom.

1 smiles:

Zander said...

Achieving financial freedom requires a different mindset. I always find difficulty in paying bills and maintaining my financial stability. I'm sure your guidelines will help me.

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