YOUR DEBT& YOUR PEACE

YOUR DEBT& YOUR PEACE

I welcome you all to Tales by Olola, a blog where we discuss topical issues, share opinion and help one another to be re-positioned in other to live a purposeful life. Am your loyal host, Olabusola Olorunnowo 

Today we are looking at debt management and investment patterns, as a continuation of the series that started few weeks back on how parents can teach their children how to save.  It's no news that a few parents die living fortunes for their children while many die leaving huge debts for their children and loved ones. Some of the reasons attributed to this situation might include:

• Ignorance or inability to manage once income: The excuse of ignorance can no longer be entertained as posterity would ask you "WHY". Hence the need to manage your income and utilize the concept of delayed gratification where necessary.
• Greed: the act of amassing more than is needed
• Lack of a proper financial plan
• Lack of evaluation of budget and expenditure 
• happen is that been in debt becomes the culture of some individuals while growing up and this go on to the point that their children imbibe this culture and it goes on to affect their finance. 

The more you can get out of every Naira you spend, the more money you will have to save for potential emergencies, a college education for your children, vacations to exotic locations, or whatever big ticket item your heart desires.But there is much more to consider, says Consumer Advocate Eleanor Blayney at the Certified Financial Planner Board of Standards. She offers five keys to family debt management:

1. Match assets and liabilities. This is a Cardinal rule at banks, pension funds and insurance companies. It’s also the idea behind target-date mutual funds, which gradually move from stocks to cash over a period of years when you are saving for college or retirement. The idea is to have assets available at the time you’ll need them. So avoid financing a long-term asset, such as a home, with a short-term loan from a credit card. You can’t use the value of your home to pay the bill. Borrowing long-term for a short-term asset spells trouble too. If you take a 10-year loan for a used car you’ll still be paying long after the car is in the junkyard.
2. Maintain liquid savings. It’s not always possible to perfectly match assets and liabilities. That’s when it becomes tempting to dip into liquid savings. Refinancing your mortgage at a lower rate is a smart move. But you may need to dip into savings to pay out-of-pocket closing costs—a good idea only if you can immediately begin rebuilding your liquid savings.
3. Watch interest rate risk. If you borrow at a variable interest rate the cost of your loan will rise as market rates go up. That hasn’t been a problem in recent years, as rates have mostly fallen. But the trend will reverse eventually. So plan for higher loan costs down the road.
4. Don’t forget to save. Paying off debt is great. But if you are cutting debt at the expense of socking away retirement savings you will end up disappointed years from now. It may be wise to pay down your debts more slowly and max out saving in a 401(k) plan, especially if that plan offers an employer match.
5. Minimize regular debt expense. Most debt must be serviced each month. Thus, it becomes an unavoidable regular expense. The larger such expenses are, the less flexibility you have. This is a key point for retirees, who may be living off their investment portfolios and be forced to sell stocks when they are low just to keep current on their debt obligations. So it may be wise to eliminate debt—even while loan rates seem favorable.
6. Research into Buying of Bonds and give it a try. Would talk about bond in the subsequent series.

Thank you for your time.
Subsequent edition would feature: Planning your wedding with with no debt to settle afterwords and lastly family debt management.

Olabusola Olorunnowo @ OlolaPearl Services... ololaa.blogspot.com.ng

Olabusola is an entrepreneur. She holds an M.A,& B.A in Theatre Arts. Her love for writing and presenting life issues, for positive impact, has brought about her involvement in blogging. 

Ref: Dan Kadlec @dankadlec