Since they don’t teach us how to handle money, we tend to spend money that is not ours and end up in debt. The commercials and promotions tend to be so seductive that they end up convincing you to buy things on credit.
If you are a totalero and have money to pay what you bought, you will not have any future problems.
The problem arises when you are not a totalero and you end up becoming addicted to credit purchases and months without interest, without understanding that credit is not the extension of your salary, it is someone else’s money. Expensive money because it has interest.
When you don’t know how to handle the credit, you end up generating a snowball effect that sooner or later crushes you.
People with controllable debts and out of control debts have come to my seminars for years. That is, they already have water to the neck. For all this there is a way out. You just need to follow the instructions (in my book Joy Finance I talk about a methodology to Get Out of Debts).
Regardless of the type of debt, these are the questions that most ask me:
… and here the answers
1. How do I know if my debt is constructive (good debt) or destructive (bad debt)?
A debt is constructive if it helps you generate more money and with that money you can pay the debt and also have a profit (Example: Education, Business and Investment).
A debt is destructive when you use it to buy things that lose their value over time or their value disappears over time (Example: Car, Holidays, Supermarket, Clothing, Lifestyle).
2) How do I know if my debt is under control or out of control?
The easiest way to get to know it is through the 30% rule. If what you pay per month in debt is less than 30% of what you earn, your debt is under control. You have to clarify everything you owe, have strategies to pay faster (like the ones I teach you in my book Joy Finance) and implement strategies to pay less interest. In short, you can handle it.
Your debt becomes out of control if you pay more than 30% per month of what you earn in debt. At that moment a snowball is made that sooner or later crushes you. If you need support in this, send me an email to Joy Finance and I will channel you with an expert who can support you.
3) Is it worth paying only the minimum?
To pay the minimum is to become the bank’s eternal business. It would take years to settle your debt, therefore it is not recommended. It is important that you preferably pay the “Payment for not generating Interest”. If you can’t afford everything, pay much more than the minimum.
4) Can I take a debt with another creditor to pay a previous debt?
If you can do it. In fact it is highly recommended. At some point there was an initiative to unify all the cut-off dates and payment limit of all the bank cards or debts of a person. The initiative died.
Why? Because the bank wins when you’re wrong. The default interests are huge. The more bank cards and debts you have, the more likely you are wrong.
Therefore, if you can group your debts with a single bank. Do it. Search the CONDUSEF website for a bank credit comparison and use the cheapest one in terms of interest.
5) I’m drowned in debt, and I don’t know how I got here. Is there something I am not seeing that makes people end up like me?
Yes, the reason is very simple. If you earn less than what you spend, with what you finance is with debt and when there are credit cards, it is very easy to buy and in your mind splo is the payment of the minimum and not the payment of the total. Having a credit card at hand makes your mind confused and does not see clearly that the problem is that you do not earn enough compared to what you spend (if you want to know 5 ways to earn extra money, download the Ebook) .
Another reason why people get into trouble is because they want to buy what they can’t have. Then enjoy before and pay later. That brings you to a problem that experts call “a cycle back.” Today you pay what you consumed the previous month. That sooner or later, destroys you. It makes you dependent on today’s income to pay yesterday, that makes you vulnerable.
6) If I have several debts, how do I organize the payment of each one?
Try to get out of debts that have higher interests first, because they are the ones that will generate the most long-term losses. If all debts generate similar interests, start by paying the smaller ones, because they are the most accessible.
7) Once I have only one debt, is it convenient for me to start saving?
You need to save money while paying off debts. Not everything should go to the payment of debts because if you do not get used to work to pay debts. Choose an amount for the payment and the rest accumulate it and invest it. You need to balance your finances with an administration system (find it in my Joy Finance book).
If you need more support in your personal finances and how to grow them, you can buy my book Joy Finance here