Tagged: Personal Finance

Investing With Debt

This might seem huge risk to any body who is reading this. I have applied for a loan from my employer. As per the service rules of my company I am eligible for an interest free loan of Rs 50,000/- payable in 10 equal installments. This loan would put me in some more debt (you can see my current debt position here), but this would be the first time that I would be using the debt amount for leveraging my financial position.

For me I cannot see idle cash sitting around with me and doing nothing. I want it to get moving and for this reason i went for that loan. The options that I have after taking the loan are:

  • Pay off debt
  • Invest in Tax Savings Instruments
  • Purchase of Mutual Funds
  • Go to the stock market

Continue reading →

Debt Reduction Through Procrastinaton

I have never come across procrastination as a positive term till date. Procrastination as I define it, is nothing but not sticking to your commitment made to yourself. As per Wikipedia it is defined as:

Procrastination is a type of avoidance behaviour which is characterised by deferment of actions or tasks to a later time.

I committed to myself that I ll go for a morning walk to keep myself healthy. My behavior in the morning, May be tomorrow or, let me sleep half and hour or so. Same is with other commitments like avoiding high calorie food etc. It can be work related like, I have to complete X job after 3 days why not start tomorrow, anyways its just a days work.

Finally from any angle I look at it, procrastination is a negative term. I found debt is a kind of procrastination, well procrastinating your payments, but in this case there is a cost attached to it, ‘the interest cost’! The more you procrastinate the more expensive your debt becomes.

But I feel that we can use the very nature of procrastination to our benefit. Why not procrastinate our purchases? Say I will buy that tomorrow and pay tomorrow to avoid the cost. Sounds like postponing the purchase. One can say it is similar to postponing things, but I want you to put this as a behavioral change. Procrastinate purchase of things indefinitely unless the sword is on your head to buy that thing.

This is a shift in attitude to purchase things. For example, what I have read many a times on blogs, that prepare a list while going for shopping, in this way you will avoid any extra purchase. But look it at the other way round. Prepare an exhaustive list to purchase and the remove the not so necessary things from the list or set a later date (Procrastination) for those things to purchase. This way you will be using your list to the fullest. If this comes to practice then you are attacking your debt from both sides of your financial management sword.

I want to use procrastination as a tool not to reduce debt but to increase my money management skills or to control my anxiety/impulse to purchase things.

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A Five Stage Process of Getting Debt Free

It’s over a year and a half that I am in a bad debt situation and surprisingly it’s nearly one and a half years that I am into a paid job. If I correlate the two then I can conclude that steady income flow increased my debt taking tendency. In other words I will say that the security of getting my paycheck made me to overspend.

When I gave it a thought so as to find the reason for the above I could come up with only one reason I can pay it later when I get my paycheck. If I talk in time frames then I was spending future money into present but the problem with this concept is that you cannot account for future expenses (always) which come as an emergency e.g. bike/car repairs, health problems and many such unforeseen incidents/events.

So what happens next? I have already spent that money in the past and now I am stuck with a high credit card bill with no money to pay for, the result a bad debt and more importantly a way to a debt trap.

The cause: credit card spending! No, the cause here is trying to afford that you can’t just by assuming valid reasons for buying at that moment, but later in debt trap you feel that you could have deferred your purchase. For example, I need a new car, (mental process: the car I am driving is making sound, the mileage is very less and asks for more maintenance so why not replace it, I am getting a good deal with XX dealer). Next day you are with a new car along with a big debt on your head.

Now you are desperate to get out of it but you can’t as you cannot overclock your debt reduction process due to a simple reason, you don’t have any extra source of income and the debt brings interest and other charges with itself which further enhances it.

In this case my mind stopped thinking constructively for alternatives for reducing the debt as it is already preoccupied by the huge debt. The result, time wastage over trivial things and not be able to devise a plan. So what should I do? Well there is a way, which I am following and trying to get out of debt. Continue reading →