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5 important steps to become debt-free!

Tuesday, January 07, 2014 by Rajiv Raj

cb139n39Follow these five steps to get out of debt trap: 

  • Reduce expenses:  All the money you earn in your life should be diverted towards clearing your debt. That should be your priority till you clear your loans. Newspaper advertisements will bombard you attractive offers on vehicles, foreign tours, jewellery and other such luxuries. But don't yield to the temptation. Stick to your goal like a horse with a blinker.
  • Consolidate your loans: Anant Ramgopal, a Hyderabad-based techie had borrowed about Rs 3 lakh from his father to manage the bridge funding when he bought his flat. He had also taken a personal loan and borrowed some more from his uncle. "A year after I bought the house, I took a top up loan on my home loan, cleared all the other loans and consolidated them," he said. This reduced his interest burden and cleared three different loans.
  • Track spending: Every big corporation tries to reduce expenses on a quarter-on-quarter basis. Your home is no different from a corporation economically speaking. So you try to reduce the costs on a monthly basis. Chose jogging or walking over a gym membership. If you can,carpool your drive to office with a colleague. If your office is at a walkable or cycleable distance from home, do the obvious thing. You also become environment friendly!
  • Make a list of all the different loans: Make sure you add the interest you pay to each loan against the loan. Hang it up on your desk to keep reminding you the high interest outgo. That should motivate you further to reduce your interest burden.
  • Make a budget and live by it: A friend of mine years ago would step out of his with just Rs 100 in his wallet. He would not spend anything more than Rs 100 a day. Many days in the week, he would go back with the same Rs 100. He was so determined about his budgeting on a daily basis. So make a rough estimate of what are your recurring costs on a daily basis and see if it can be reduced in anyway. For instance, if you take a cab to some place everyday, see if there is a bus. Fix a daily budget and stick to it.

These steps are a good start for starting a healthy financial life. Stay financially healthy and fit.


MadanRajiv Raj

Rajiv is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India’s first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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