LOUISE FAIRSAVE – Dealing with debt

There are various ways in which our livelihood may be marred by debt. Maybe a major investment goes sour; a business undertaking fails miserably, leaving drowning liabilities for the proprietor and his family; a gambling addiction overtakes the investor; or say, an extended yet debilitating illness strikes. Debt may also arise from indiscipline spending. 
Just like any other adversity, insurmountable debt can happen to anyone. It therefore seems only fair to provide some guidelines for dealing with such. 
 
Health: regular medical checks are desirable for you and all your dependents. This will not eliminate the disposition to a serious illness but, at the least, it can increase the chances of early diagnosis and of planning financially for the treatment. 
However, being medically fit is not just the absence of illness. It is important to maintain an all-round healthy lifestyle. 
It is accepted that mental and emotional well-being are useful in maintaining a balanced life. Yet, for persons who become aware of their own financially destructive habits or addiction, there is usually high resistance to help from others. Counselling is an important step in getting back on track before a problem becomes a disaster.  
 
Insurance: the benefits of a carefully considered insurance strategy cannot be underestimated. Everyone should consider general insurance, health insurance, loss of income insurance and for a business, business interruption insurance and/or professional liability insurance.  
All types of insurance may not be needed or even be reasonable. However, the explicit consideration of each type of insurance contributes to the understanding of the related risk exposures.
 
Financial literacy: enough cannot ever be said for building a better and better understanding of personal financial matters. A wide understanding of the prevailing tax laws is fundamental to financial literacy. It is especially important to consider the tax implications of holding debt. 
A financial advisor can be useful support, but ultimately, the choices about your finances should remain personal. 
 
Pension planning: some people manage their finances apparently well during their working years; then during their retirement are forced to pass around a hat to collect from friends and family, and sometimes even the general public. 
A specific pension plan, developed early in one’s working career, is advisable no matter what your circumstances are in life at the time. 
 
Ultimate honesty: in spite of all precautions, the adversity of debt can descend with full force. How can you deal with the resulting trauma? Whenever it comes to dealing with debt, my best advice is to be honest with all creditors. Work with creditors to generate a long-term solution. Be honest and open with your relatives, too. Choose carefully whom you will share your troubles with. Being saddled with debt generates feelings of embarrassment and the desire to sneak away from decent society. However, it is a critical time when one should seek all the support and understanding possible rather that suffer the pain and disappointment alone and depressed.
Louise Fairsave is a personal financial management advisor, providing practical counsel on money and estate matters. Her advice is general in nature; readers should seek other counselling about their specific circumstances.