| Debt Management and Cash Flow Management (1.4.1)
Debt management has two elements:
1. The process of understanding what you owe. What is your regular repayment and what is the interest rate?
2. Understanding the purpose of the debt. Has the debt purchased an appreciating or a depreciating asset? Worse still, is debt funding cash flow?
By understanding the two elements above you will be able to determine which debt item should be the focus of your attention. For we all want to be free of debt.
Once you understand your debt you can create a cash flow management system to channel your allocated resources into your ‘worst’ debt. Once you have paid off your worst debt the money allocated to that debt can then cascade onto the next item of debt.
By cascading you allocate more and more money to the next debt when each earlier debt is settled.
Don’t forget if you’ve settled a credit card and it no longer features in your plan — ‘shred it’.
Debt management is a three part system:
1. Understand your debt so you can prioritize its elimination.
2. Use a cash flow management system to allocate available resources to settle outstanding debt
3. Cascade allocated resources always onto the next debt in the priority plan.
You Tube video links:
Segment 1 http://youtu.be/eFwL0S4CReI
Segment 2 http://youtu.be/S-SbBg42KPY
Segment 3 http://youtu.be/ppqObFhb-hc