Dear Life Coach,

I am a 28-year-old female, and I would like to go overseas to pursue a professional course for three years. The problem is, I have multiple loans, totalling approximately EC$30,000 that I have been dragging behind me for the past five years. I have been employed during this time, but I have never earned enough money to cover my bills and live comfortably at the same time, so interest has piled on over the years. I have a two bedroom house, gym membership, an SUV, and furniture that I have to pay for, in addition to other living expenses, light bill, telephone, groceries etc. I feel like a fish with ‘Loan Sharks’ pursuing me.{{more}}

How can I get out of debt and move towards my professional goal?

Loan Fish (LF)

Dear LF,

You feel as if you will not get out of debt soon, which hampers your professional goal, and like you will be devoured by your creditors.

What is Going On:

Here are some factors that may be contributing to your situation: ‘financial distress’, need for asset

re-structuring/financial strategizing, need for debt consolidation, and possibility of student loan. I will address these briefly.

‘Financial Distress’

‘Financial distress’ usually refers to a company that cannot meet its financial obligations to its creditors. When there are high fixed costs (set bills) and assets that are not liquidated (valuable items, but no money in hand), and other factors that affect the economy (e.g. a recession), the company’s credit line increases, which in turn increases its ‘financial distress’. Here, ‘financial distress’ is being applied to an individual, since a household functions much like a company, in that it has income and expenditure, and is affected by fixed costs, illiquid assets, and the ebbs and flows within the economy (e.g. increases in cost of living).

Furthermore, an individual who is experiencing financial distress also experiences a higher stress level, decrease in morale, financial embarrassment, and could become less productive overall, due to this financial burden.

What to Do:

Need for Asset Re-structuring/Financial Strategizing:

Good financial management requires reviewing one’s finances at least once a year. If expenditures outweigh income, then a plan should be put in place to restructure one’s asset base and income. Some asset re-structuring tips include the following:

1. Liquidate Assets: Sell items that are nice to have, but not necessary for your survival, and items that are stored away and unused for more than six months and have no sentimental value (e.g. furniture, clothing, books, articles, etc.) in order to create a better cashflow and help pay off your debt.

2. Take a Second Job: Consider taking a second job in order to increase your income, e.g. baby-sitting, cleaning, selling products (e.g. Avon).

3. Create Your Own Second Job: Buy and sell small items, or make and sell baked products to friends and family (e.g. cakes, cookies etc).

Some tips for financial strategizing include the following:

Put Off Studies: Put off studies for another year or two while you clear your debt and re-build your savings. Reduce accomodations: Consider downsizing from a two bedroom house to a one bedroom house or a studio apartment. This would cost less and free up cash.

Give Up Gym Membership: Consider giving up your gym membership and go jogging or walking in order to stay fit, and invite your friends to go along with you. Also invest in dumbbells and exercise bands for muscle toning. This will also free up funds. Change your vehicle: Downsize from a SUV to a regular family car. This will free up funds in terms of payments and gasolene cost. Review Other Living Expenses for the Best Deals: Shop around and review all current bills, including telephone, electricity and groceries to determine whether you are getting the best deals, and switch your present carriers or stores if you are not.

Need for Debt Consolidation Debt consolidation refers to an individual’s use of different debt assistance plans that combine multiple debts, loans or payments. There are two approaches to debt consolidation:

1. Consolidation Loan: Taking a large loan (e.g. secured against your vehicle) to pay off several smaller accounts, so that there is only a single monthly payment.. This will reduce the stress of having multiple creditors on your trail.

2. Debt Management Plans (DMP): Here the individual pre-negotiates lower interest rates with creditors via a DMP agency and so makes one payment that is split among all his/her creditors. You may choose to use the asset re-structuring/financial strategizing tips above simultaneously with debt consolidation.

Apply for Student Loan

Student loans are available for individuals who wish to pursue higher education, and the re-payment begins after the course is completed. Application is made through the Ministry of Education and guarantors and/or some kind of collateral is required. You could find out whether the student’s loan would assist you with debt consolidation in order to re-organize your finances in preparation for studies.

LF, juggling one’s finances can be hard, but if we are willing to make sacrifices where it counts, we may find that we are better able to survive on what we presently have.

Life Coach

DYNACII

Need help with relationship and other problems? Ask DYNACII’s Life Coach. Email your questions to dynacii@gmail.com. To Chat with the Life Coach, visit: http://www.dynacinternational.com. Dynamic Action Center International Inc. (DYNACII) a non-governmental organization committed to social and spiritual empowerment.