The trend is clear – the number of consumer loans continues to increase year after year. In addition, the average loan amount increases. This applies to both more typical fast loans for consumption and private loans, which are used, for example, for cash deposits on a home or car purchase.
Although the average household in Sweden generally has a fairly robust economy, an increased debt burden can pose problems in the long run. If the repayments on the loans are not taken care of, or if there is something unforeseen that causes the income to fall (illness, unemployment, etc.), even a smaller debt burden can become burdensome.
If you feel that you would like an economy with fewer and smaller loans, and a more solid foundation to stand on if it should start to storm, then you have three simple tips below.
Why do you have a debt burden?
A debt burden and any associated problems such as payment complaints do not arise out of nothing. You have made conscious choices when you have taken out your loans. The question is just why you took out the loans? To take the first step in the process of clearing the economy, you have to ask yourself this question and answer it honestly.
You should also review the debt burden in its entirety to get a current picture of the situation. Maybe the situation is worse than you think, maybe it is better. Regardless, you get black and white on what your choices mean for your finances.
You should also think about the balance of your economy as a whole. The fact that you have taken out a loan (and may also continue to borrow) is because you lack a balance in the economy.
Plan, budget and follow up
There are no shortcuts to a more robust economy and a smaller debt burden. It is required that you prioritize ongoing work to overcome the problem.
The first step is to set up a plan and for this, you should start from what your debts look like. What do the loans cost you each month? How much extra can you pay off on them monthly? Look at your income and expenses (including interest payments and amortization) and see what space you have. Also try to create additional room for extra payments. It can mean that you have to live much more sparingly than you have in the past. It may take a while to get used to this, but most – if they really decide to do so – can cope with longer sacrifices.
Once you have a comprehensive plan ready, it’s time to break it down into a monthly budget. Here you enter all your income and expenses for one month. After each month-end, you should then follow up on how you managed to follow the budget to make adjustments if needed.
Speed up slowly
Many who decide to make a change set up a furious pace initially and then lose momentum. However, personal finance is a discipline that works more like a marathon. The old fable about the turtle and the hare is appropriate to mention in this context.
In the competition between the turtle and the hare, the turtle won because it slowly but surely worked its way forward step by step. It’s an idea you can take with you when dealing with your debt burden. By making small, conscious changes on an ongoing basis, you can have a greater impact than if you try to make larger point efforts.