Concept of Debt Management.

 Concept of  Debt Management.

The fortunes of life lies in the hands of only those who make preparation to manage them judiciosly. It is my popular quote that “honour is a product of labour, favour or both” and my conclusion about that quote has always been “whichever way honour comes (labour, favour or both) you should  position yourself to grab it”.

It is one thing to create wealth but it is a different thing entirely to manage the wealth created. Any wealth created but not peroperly managed can give rise to debt. This is one major reason why individuals run into debts and great business empires get bankrupt. Liquidation is the only cushion against debts and bankruptcy. Let me say that the success of every business depends on  good management. This good management is more or less one of the assets of every business that wants to stand the test of times. In other words, while good management can be an asset to a business but mismanagement can be a liability and so the sole survival and success of every business lies with good management principles. Let us quickly define some terms here: asset, liability, bankrupt, and liquidate.

An assset is a useful or valuable thing or person. Put in another way, an asset is a property owned by a person or a company and such property  is regarded as having value and so its availability can be used to meet debts, commitments or legacies.

Liability is the direct opposite of an asset i.e   something or a person that is not useful or valuable. In other words, while an asset can appreciate and is advantageous , however liability depreciate and it is disadvantageous.

Debt simply means money owed or due i.e the state of owing  money.

Bankrupt is adjectivally being declared by law as inability to pay one’s debts.

Liquidate means to wind up the affairs of a company by ascertaining liabilities and apportioning assets. Put in another way, to liquidate simply means to convert (assets) into cash or to pay off debts.

Being in debts can affect someone physically, psychologically, socio-economically and sometimes even spiritually. Debt management is important in two ways. The first is to prepare you against being in debts and the second importance is to serve as a ladder to bring you out of debts if you are already in debts. For the later, the only solution be debt free, debt relief or out of debt is to identify the sources that led to the debts and then strategically put up plans to get out of debts. This of course is not an easy task especially if the debt is huge. But it is practically possible to be out of debt if you have a strong determination to be debt free. Let me quickly stress here that sometimes to be out of debt you have to take risks. The same risk taking is necessary for wealth creation. When you are in debt there are some questions if asked and well answered by yourself can be of immense help. These are some of the questions you must ask and find good answers to: How did I get into this debt? When will I be free from this debt? How will I be free from this debt? Can I be free from this debt? You ability to sincerely and honestly answer this questions to the best of your knowledge is a plus that will help you manage and get out of debt.

A refined idea has the power of paying off your debts or getting you out of debts or even managing debt. There is much in much difference between some one who wants to loss weight and someone who wants to get out of debts. That is weight loss plan is similar to debt relief plan. How? If you keep doing what you are advised to do and avoid the things you are advised to stop doing in order to loss weight without going back to them then definitely you will loss weight and be happy. Also, if you keep doing what you are advised to do and avoid the things you are advised to stop doing in order to be debt free weight without going back to them then definitely you will be debt free and so be happy. If you do not avoid those things that encourage debt accumulation you will never get out of debts. The mistake some people who are in debts today do is borrowing to pay for the debts they owe. This is not bad if what you borrowed does not attract interest rate. But if however it does then be rest assured that you will accumulate much debts that you can not pay back if you do not precautions and look for best alternatives rather than borrowing. You are advised that one way to manage debt is to always plan for emergencies and uncertainties. You can should plan for your seen and unforeseen expenses. Cultivate the habit of contributing to emergency fund. This is where good investment plans come to play. I am an advocate of working and saving to invest wisely and that is why I shared with you and for the sake of emphasis I am still sharing with you the four reasons why you must save to invest wisely( The 4R’s- retrenchment, resignation, recession and retirement). See in details the Four Reasons Why You Must Save to Invest Wisely here.

Food for Thought: “Understanding the concept of debt management is imperative to be debt free”.

To me this is the concept of debt  management.I know there are others, so leave what you think is the concept of debt management in the comment box below.