Lack of organization will clip your wings
You get a paycheck transfer. You’d like to pay back the friend you borrowed money from last month, and you’re about to call him, but you just got a text — it’s a collection agency. That’s right! Delayed again, and there is still a mortgage installment plus phone payments, and what about bills?
Does this scenario seem real to you? This is what everyday life looks like in thousands of Polish homes. Jumping from putting out one fire to another. Total chaos.
As much as you may have the best intentions, you won’t get anywhere if you’re not aware of the details. Let alone control the situation. Without comprehensive knowledge of your own debts, you leave things to chance. That’s why today we’re going to take a systematic inventory of your obligations.
What debts do I have?
We’ll start with the simplest part. Launch Excel or another spreadsheet — you’ll see in a moment that doing it on a piece of paper makes absolutely no sense. List all your debts one below the other. Without any details, we’ll get to that in a moment. Remind yourself of every obligation you have, even the smallest one.
What debts you may have:
- mortgage;
- home furnishing installments;
- credit card;
- consumer loan;
- car leasing;
- instant loan;
- loan from family or friends;
- outstanding housing and utility bills;
- unpaid fines;
- child support;
- debt at a local grocery store; etc.
These are just examples. There may be more to it because compulsive debtors are very creative in where they get their money from. Of course, a complete list should already be created when calculating your net worth. If you haven’t done it yet, go back to the previous lesson.
Breaking down the debt
Whenever you happen to miss a deadline to pay off one obligation, the problem grows. It’s going to get worse with each one, all because of a lack of organization and a repayment plan. You need to take control of your finances again, and that comes with specifics. Right now your spreadsheet will start filling up with them.
The more you know, the more you can control, so review your credit agreements, documents, reminders or other sources of information and find the following information:
- Type of debt; this is the first part of this material – listing your obligations. You did that a while ago.
- Creditor; who you owe money to — name of bank, loan company, etc. If you receive a reminder or other form of notification, you will quickly determine which debt is concerned.
- Amount of debt; how much you have left to repay. It allows you to easily add up all your obligations. It will also give you a picture of which debts are worth tackling first.
- Annual interest rate; this will allow you to compare debts and track those that are draining your pocket through the highest interest rates.
- Remaining number of installments
- Minimum installment amount; this information allows you to determine the minimum monthly cost of all your obligations.
- Payment date in the month; the basis for creating the appropriate transfer queue.
- Are you behind on your payments? Do not divide the summary into 2 lists, but mark it in a separate table — this will make it easier for you to sort the sheet.
- How many days of delay? The longer the delay in payment, the bigger the trouble.
- What amount are you late with?
- Possibility of deferred repayment; Does the agreement provide for a payment holiday? If so, is there an additional cost involved? A free-of-charge debt payment suspension will help you free up funds with which to overpay your other obligations.
- Is the debt being handled by a collection agency/bailiff? As long as the debt does not have a significant delay, the creditor is rather delicate. A collection agency will be insistent, and a bailiff will simply plough through your account – so it’s best to cut a deal with them. Don’t avoid contact or reject calls. Quite the opposite! Show that you have a repayment plan and take initiative. You will stand out from sassy debtors, and you may even be able to negotiate a new repayment schedule.
- Are there any penalty interest/reminder fees?
- Who was the debt incurred for? For yourself or for someone else? There are times when we go into debt for a loved one because of their insufficient credit capacity.
- For what purpose was the debt incurred? This information is irrelevant to its repayment, but since it hurts you now just from looking at it, chances are you won’t repeat the mistake next time.
- Comment; anything you want to add from yourself. You can type in how you feel or how much you regret your decision.
The better you describe your debts, the easier it will be to put together a plan to deal with them, which we’ll cover in the next material.
Are you gnashing your teeth in discontent just from looking at the list? Yes, it is quite a time-consuming task, but it is definitely worth it. You can’t just do it in your head, because not only is your memory unreliable, but you will also be susceptible to the influence of emotions, which very often obscure the most beneficial solutions for debtors.
What does it give you?
No analysis, but just what the spreadsheet shows you, which is a basic set of information:
- Total amount of debts to be paid.
- Total minimum amounts you must repay each month.
- Total overdue debt amounts.
However, Excel doesn’t know what to do with the rest. And you can do a lot. You’ve done a lot already, anyway. Get some rest, and in the next material we will turn all of the above information into an effective action plan.
