1
10 THINGS TO DO WHEN YOU ARE BURIED IN DEBT
What to do!
1. Don’t increase your debt
There are many risks of increasing your debt, especially when you are drowning in debt. If you posses credit cards that are maxed out, cut them in half and remain with only one credit.
You also need to cut up all “convenience” cards like department store cards, gas cards, among others.
You’ll use only one credit card to purchase items that you will be capable of paying off in a short time until you get your expenditure under control.
2. Watch your spending
Learning how to effectively budget your cash is a significant step in achieving your financial goals. To do that, create a list of your earnings as well as your expenses.
You have to earn more cash than you spend otherwise it may be difficult for you to get out of debt. Also, you need to focus more on your necessities and unleash luxury items.
This way, you will save a lot of cash which can be used for paying off your lenders.
3. Create a realistic budget
Keeping track of your earnings is just the first step to getting out of debt. You need to create a budget and stick to it.
Allocate a realistic amount of money to different expenses. For example, 20% of your earnings should go towards your food bill and 40% should cover other utilities.
Ensure you have enough cash left over to settle part of your debt.
4. Join a debt management firm
Joining a debt management plan with the debt relief agency is another alternative for people who are buried in debt.
This is because a debt management plan will consolidate all of your unsecured debt into a one monthly payment to your debt relief firm, who then pay out the money to your creditors.
The key advantage of enrolling in a debt management plan is that it may result in reduced interest rates.
5. Know how much you are owed
Debt can sometime feel overwhelming since you don’t have an idea of how much lenders you owe. Gather all your bills and create a simple list of all the debts you are owed.
Write down all the relevant facts encompassing the names of the creditor, your balance, your minimum weekly/monthly payment as well as your interest rate.
Next, set your main financial goal to be free from debt in 6 months, 1 year, 2, or whatever it takes.
6. Start settling some debts
Take the figure of cash you trimmed down from your budget in step 2, and use it to repay your loan. It is always advisable to prioritize the loans to which you intend to apply this extra cash.
Do you have a past due debt and your lenders are calling and sending you e-mails five times a day? Do you have debts with very high interest rates?
You need to consider these top priorities.
7. Set a target
You need to determine how much loan you want to get rid of by the target date. If for instance you have different credit cards totaling $5,000 as well as a $5,000 student loan balance and you need to clear off all your credit card debts and half your student loan in a year, then your target will be $7,500.
8. Revisit economizing
Take a look at your expenses once again. Try and economize where you can.
But when you get to a point where you can’t reduce your expenses any more, you have one of these two options:
a) make more money
b) reduce your monthly debt payments.
a) make more money
b) reduce your monthly debt payments.
It may be necessary to look for a part time job, or have a non-working partner take a job to generate an extra household income.
9. Negotiate interest rates
Credit cards usually charge anywhere from 0%-20% in interest. But we have seen cards that charge over 40% in interest!
The good news is that you can negotiate better interest rates. Gather all your financial statements and talk to the financial institution or representative of your credit card firm.
Remember to make your monthly payments on time and in full as this will make you eligible for better interest rates.
10. File for bankruptcy
To some people, the term “bankruptcy” is enough to get their blood boiling. It is perfectly understandable though.
Filing for bankruptcy can have a huge impact on your life. It is therefore important that you consult with your lawyer to know whether or not it’s the right decision for you.
Comments
Post a Comment