These days it is apparently hard for people to live without any sort of debt, regardless of their income bracket. And this consumer debt (acquired for consumption rather than investment) is not always because most people are rushing to acquire those luxurious brands which are beyond their reach, but simply because sometimes it is impossible to avoid debt for acquiring basic goods or service. It has become a common phenomenon for one to acquire debt so as attain relevant education levels, mortgage, and automobile - And it is rare that your income will perfectly match all your expenses and service those loans. If not carefully managed, these debts could cripple your retirement savings and drag you into a financial depression causing lack of financial independence. Good management of your personal loan is all about settling your debt obligations on time while improving your standards of living and avoiding other unnecessary loans. It will require you to carefully asses the period it will take you to repay every loan and the interest rate. Remember you are aiming at effectively benefiting from the use of these loans while the lending institution managers also want to maximise returns to shareholders. Financial experts often note that all your outstanding debts should not exceed 36 per cent of your gross monthly income. This debt-to-income ratio is determined by dividing the amount of money you spend each month to service your debts by the amount of your income and multiply it by 100. It is like that very few of you will be hitting 36 per cent. Majority will be far above it. This calculation is very important because it will always remind you whether you have too much debt for your income to service. It will remind you that you are not supposed to be a slave, working to earn lending institutions interest, but you need to have at least a certain amount of your salary saved to finance part of your future investment plans. It is also paramount to have a monthly budget and budgetary discipline so as to have good spending habits. gahamanyi1@gmail.com
