How to avoid "Greece Crisis" with your personal money

Recently while going through newspaper , my dad turned to me and said in his typical “we know it all , when it comes to money management” tone - See how Greece Crisis once again proves the importance of diligent money management.

Parents!!!!

One of the most common trait of successful people and organisations is that they treat crisis as an opportunity to learn lessons on how to avoid them. In the same manner Greece Crisis , though at the country level, provides an excellent opportunity to revisit how we should manage inflows and outflows of our personal money.

So lets go have a look at how to avoid debt i.e. loan crisis -

1. Never live beyond your means - Typically pensions range from 40% to 50% of last drawn salary, but in Greece it may go upto 96%, which is simply not sustainable. Similarly spending beyond your income will eventually lead you to what is called in banking terminology - Debt trap.

2. Never go for Easy Debt - Being a part of European Union, Greece could avail of debt at a very low rate and without much of diligence on part of creditors. This easy availability of debt makes one vulnerable towards availing “non-required debt”. This generally happens in case of Credit Cards  where ready availability of debt sometimes simulates one to subscribe debt. Never EVER spend on Credit Card just because you have credit limit available. Spend only if you are spending on something worth utility to you.

3. Timely Service of Debt - Another reason that pushed Greece to the extreme was delayed service of their loan outstandings. Despite all the planning and management loans are many a times unavoidable or even suggestible to avail. But timely service i.e paying your EMIs on time and pre-closing your loans whenever possible is very critical to ensure that you are not made to pay penalties or there is no increase in your liabilities.

4. Aware about Terms and Conditions - Be always inquisitive about the terms and conditions related to any loan which you intend to avail. Devil lies in details , similarly in case of loans , devil lies in fineprint of the agreement. Always go through it as much as possible.

5. Loans within limits - Thumb rule says that sum of your EMIs should not exceed 50% of your monthly income. So always ensure that your EMI liability is lower of this limit and what is left net of expenses in your income.

If you want to learn what money mistakes you should avoid in your 20’s , Click Here .

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