The key to managing your finances is taking the time to educate yourself and then incrementally applying what you have learnt to improve your financial health.
Sometimes it helps to have a different perspective on an issue to better understand it. And what better teacher than nature to help us with our financial management! Over the next few weeks, we are going to explore the five secrets of financial management. We will share some tips that you can learn from the Big 5 and apply in your daily lives based on the behaviours that these animals display. The way they live, hunt and survive can teach us some habits we should adopt when it comes to managing our finances. This week we will take some tips from the Rhino on managing debt.
No one wants to owe anyone, but the reality of modern living is that we will carry debt at some point, whether it be through a credit card, buying a house or a business loan. The important thing is to understand debt, keep yourself from getting over-exposed and ensure you have good debt.
This is the kind of debt that puts money back into your pocket in the long-term. An example of this is having a property that generates rental income, furthering your education or loan that will increase your earning potential.
Bad debt does nothing to improve your financial health. Typically it is a debt you acquire when you buy something and the repayments continue beyond the consumption of what has been bought. An example of bad debts is credit cards, a shop account or buying a car/house you cannot afford. Bad debt can escalate to ugly debt when you run out of credit and you need to top up on personal loans or apply for new credit cards with different banks that typically come at a higher interest rate. This is a harder debt to come out of as it tends to spiral out of control. But don’t lose hope; with good debt management skills it is possible to stamp out debt like the rhino.
Rhinos are normally peaceful animals and don’t have many enemies. From time to time the mother rhino will need to protect her calf from danger. To take control in situations where they are threatened, rhinos charge down anything that is in their way. The Secret of the Rhino is to charge down your debt. We cannot ignore our debt just as the rhino cannot ignore any danger or threat to her calf. We need to manage the level of debt we have so that it doesn’t threaten our financial security. Debt is very expensive and can eat away our wealth. We can use the Secret of the Rhino and apply it to our debt by charging it down as quickly as possible.
We need to be prudent in how we spend our money, considering the current economic climate. The cost of living is currently very high, with prices of goods and fuel impacting our wallets. Rather focus on saving, reducing your debt and living within your means. If the idea of tackling your debt seems overwhelming, remember that you don’t have to do it alone. Surround yourself with experts or people who have the knowledge to help you stamp out debt. Have a financial advisor to help review your financial plan and overall help you to take care of your financial affairs.
Article by Bakang Pearce is the Business Development Manager at Old Mutual Life Insurance.
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