Welcome to the concluding part of the series “Put your Finance together!”

Let’s do a quick recap, shall we?

In the first article in the series, we talked about the importance of being financially secure and the discussed the four elements of Financial well-being according to the Consumer Financial Protection Bureau (CFPB). In summary, the elements include having control over day-to-day, month-to-month finances; the capacity to absorb a financial shock; the financial freedom to make choices to enjoy life and the freedom of choice which puts you on track to meet your financial goals

The second article showed us the importance of having a financial plan which entails creating a vision statement, evaluating your current financial situation (Calculating your net-worth) amongst other things.

In this concluding part, we will discuss a bit about Debt Payments and the way forward.

Read Also – Put your Finance together! Part 1

Debt and its’ cohorts:

  • The first step in managing debts is to stop creating more debts. Literally. Stop! It is impossible to get out of debt if you can’t restrain your financial habits right now.

Financial peace of mind will make you happier than having more stuff than you can pay for.

  • Now that you’ve stopped creating more debts, you need to evaluate what kind of debt you are dealing with. Is it good or bad?

Debt incurred to buy a home or for education is considered a good debt. This kind of debts will in the long run help boost your financial position. Make adequate plan for regular instalment payments.

In the reverse, any debt that does not improve your financial position or you can’t pay for in the shortest period is considered a bad debt. While you should not allow yourself to be under pressure to pay off a good debt, it is important to pay off a bad debt as soon as one can.

You could consider paying off the debts with the highest interest rates first or pay off the smaller amounts after all “A small victory can give you the momentum to stick with the program,” says Anisha Sekar, VP of credit and debit products at Nerdwallet.

Now that we’ve got the debt thing figured out, let’s create a strategic spending plan.

Create a Strategic Spending Plan:

While creating our financial plan, we talked about how we need to know and track income and expenses for every month.

Now rank your expenses in order of importance to you. Look at the items on the bottom of your list and decide whether you’d rather have them or be financially stable.

The objective is to create a Strategic Spending Plan where your expenses are lower than your income.

Things to include in strategic spending plan:

Rent, Groceries, feeding (Eating out and food stuff), Clothing, Entertainment/Fun, Emergencies, Debt Repayment etc.

Read Also – Put your Finance together! Part 2

Pay your Debts:

A method I particularly like for debt repayment is called the Stack Repayment method.

The first thing is to try to make the minimum payment on every debt even the debt with the highest interest rate.

Go back to your Debt repayment allocation from your strategic spending plan and use the balance (if any) to pay off the debt with the highest rates. Do this until the debt is paid off

After paying off the debt with the highest rate (Target Debt), move the Stack Repayment (which includes the previous minimum payment as well now) to the next debt with the highest interest rate. This becomes the new Target Debt and you are using your Stack Repayment amount plus the minimum payment for the new debt.

As you decrease a debt you actually increase your Stack Repayment amount. This means the second debt will get paid off even faster, the third even faster than that, and so on and so on until you are completely debt free.

Like every new habit, life will test your commitment to your new responsible money attitude and it’s up to you how you respond. When things go wrong, you need to shrug it off and get back on track. Show compassion when you accidentally go over your Strategic Spending Plan and decide to do better next week.





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  1. abayomi

    Oyinlola, this is a good read I must say.

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