It seems that our modern electronic age has delivered us an instant solution for almost every problem. If we need information, Google has it at our fingertips; if we are looking for love there is an app for that; we make appointments without speaking to a real person and shop for groceries without leaving home.
If the financial experts and economists are to be believed, however, while we might be clever at using our smart phones and devices for everything, we are not very smart when it comes to staying out of debt. In fact, this week’s newspapers report that personal debt in Australian households is the third highest in the western world.
As long as we can service this debt it is smiles all around, but an unexpected life circumstance like unemployment, or suffering a serious injury or illness will very quickly replace those smiles with panic. There are no instant solutions to this problem, just a long and painful lesson in money management.
These lessons have not changed in centuries and are so simple that they are often ignored. Establish a budget, live within your means, pay your bills on time, use credit cards sparingly; this is all excellent advice but once a debt becomes unmanageable, we may need the assistance of financial experts to restore some equilibrium to our world.
For personal debt, a good place to start is to track spending, as most debt occurs when we do not monitor our personal expenses and spend indiscriminately, often using credit cards. The next step is to establish a budget to see how much money is coming in and going out each week, fortnight or month. We can then sort out our money priorities and take control of our spending and saving.
Even while we are paying off the debt we have accumulated, it is important to save something, no matter how small. Throughout the year, there will be events such as family birthdays, outings and Christmas that we want to be part of, so setting some money aside for this is an important part of keeping to our debt recovery plan. Where in the past we may have funded these events on credit, we are working towards being debt-free all year round, so we need cash for these celebrations.
These are just a few simple techniques to start making in-roads into that debt burden. If the task seems overwhelming, there are debt recovery agencies that will help people with personal debt. By the same token, many businesses struggle with debt from time to time, and they also need expert assistance to get them back on track to profitability.
Businesses can fall into debt for many reasons, and not necessarily through bad management, although that is one of the major causes. The business world is more volatile than it ever was, and markets can disappear almost overnight. The rise of on-line shopping, for example, created opportunities for those Australian retailers who saw the opportunity to reach global customers. Others who were slower to react are still struggling to reclaim market share.
Whatever the reason, there is much at stake when a business calls for expert help to manage its debt. Accounting firms such as Carbon Group offer these services to client businesses and work in conjunction with the management to develop debt recovery strategies. Successful small businesses are vital to our economy and the loss of jobs and revenue when one “goes under” affects not only the employees but also everyone else along the supply chain.
Keeping a business debt free all year round is much more of a challenge than it is for a household, but the principles are very much the same. Business processes are much more complicated, the need for lines of credit and finance are more urgent and the management tools much more sophisticated than a simple household budget. However, get it wrong and the result will be much the same.