The good news about debt planning is that it forces you to be more disciplined. It’s easy to see that discipline is coming from cutting down on expenses.
In fact, this should be non-negotiable. This should be so obvious that it shouldn’t even be mentioned. Unfortunately, financial common sense is not that common.
I have to spell this out. A key part of financial discipline is to simply learn the willpower and the mental focus to keep your expenses low. With that said, there is a key factor that you need to keep in mind.
When you’re planning out your debt, you’re also forced to look at your different debt consolidation options and see which makes the best sense down the road.
This is a very important factor to keep in mind because you would be able to identify interest-locked debt. These are debt where interest doesn’t move up. You’re already aware of adjustable rate mortgages. These are infamous for exploding interest rates. Well, there are also other consumer debts where the interest rates can go up with time.
You have to pay attention to the interest rate factor. Otherwise, your debt planning is going to head south sooner rather than later. You might end up facing a very nasty financial shock down the road.
Unfortunately, with the way these things play out, you’re often faced with a nasty shock to your finances at precisely the time that you can least afford to. So if you want to avoid all sorts of unnecessary drama, you might want to focus on locking your debt at certain interest rate ranges.
The good news is that there are lots of credit card and credit facilities out there that have fixed interest rates. Focus on those and incorporate them into your debt planning system.
Pay attention to their terms. See how long the fixed rate periods are. Also, check if there are other payments or fees that can go up over time.
Once you have a clear idea as to which credit facilities you can use, you need to make it a point to use only those facilities. Try to pair these facilities with rewards programs. This way, you get the benefit of using credit at low rates while at the same time racking up benefits.
The most common benefit paired with credit card usage, of course, is your average airline’s miles package.
There are other benefit or reward packages that can lead to cashback, discounts, and other goodies. These goodies have cash value so view them as some form of windfall income. Don’t leave these benefits out when planning your choices of credit facilities or mapping out your credit strategy.
Make no mistake about it. Debt planning is not about debt avoidance. It’s all about using debt in such a way that it doesn’t hurt you. Ideally, you can plan your debt in such a way you can come out ahead. It’s all about planning.
It’s all about looking at the future, paying attention to probabilities, and looking at how they affect your desired outcomes.
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