Friday, June 19, 2009

In Debt…Tips to Get Back in the Black


In Debt…Tips to Get Back in the Black

Mortgage payments, car loans, medical expenses…on and on and on…. In today's society, being in debt seems almost inevitable. Not many Americans are able to buy a house or a car outright with cash. Instead, they apply for loans in order to make their major purchases. Before they realize it, many consumers find themselves deeper and deeper in debt.
Circumstances such as job loss or accidental injury can also compound the problem. Since many consumers find themselves unable to keep up with monthly payments. They can incur even more debt from late fees and interest payments. Having debt management issues can make consumers feel helpless and stressed out—factors which can have an effect on other aspects of their lives. The good news is that there are ways to get yourself “out from under”. If you are currently in debt, educating yourself on ways to become debt-free and sticking to those methods is key to living a healthy financial life.

To determine exactly how much you owe to your creditors, check all the billing statements sent to you and then create a spreadsheet that lists balances, interest charges and minimum monthly payments. This can be useful for creating a realistic budget.
Once you determine your debt level, here are some ideas to get your debt under control.

Stop adding more debts. Cut up your credit cards, if they are the main source of debt. For emergencies, keep one credit card with low credit limit and commit to pay the full balance every month.

Develop a spending plan. Creating a budget and sticking to it is a great way to help build good spending habits. By subtracting your expenses from after tax income, you will be able to calculate how much you have left over to pay off your debt.

Save some money. If you begin by evaluating your monthly expenses you can reduce unnecessary spending and use the cash to build an emergency fund for those unexpected expenses. Remember to always pay your bills on time so you can also avoid paying unnecessary fees such as late payment fees in addition to interest charges.

Find extra money. If you have a job, try to increase your current income by looking for assignments that offer over time pay or tasks that will result in a bonus or a higher commission. Securing a part time or second job can also help create extra income.

Talk to your creditors. Contact creditor(s) and explain the situation. A plan may be worked out so that obligations are repaid.

Change your lifestyle. Live below your means and don't charge more than you can afford to repay in full the following month. If your expenses exceed your income and you are using credit cards to enhance your lifestyle, stop. Instead, explore ways to increase household income, reduce expenses, or both.

Doing it yourself. The most desirable option is to set up a debt payment plan and discipline yourself to follow it. Power Pay, a debt management program can help. All you need to run the program is information about each debt. The program will compute how long it will take you to get completely out of debt. If you only make the minimum payments it can take almost a lifetime to get out of heavy debt. Once you have paid off one debt you roll that payment onto another debt thus increasing the payment made on the second debt. This pattern continues until all the money you are paying in a month on debt is going to pay off the last debt. Power Pay will calculate which debt will be in your best interest to pay off first, and provide you with an amortization chart.

Hire debt reduction help. Sometimes it does not seem possible to manage the problem of being financially overextended. If you are unable to solve your financial problems alone, counseling services can help you set up a budget and debt payment plan. Nonprofit financial counseling agencies charge little, if anything, for their services. Military bases and industries often hire people who can help you manage your debts. Housing authorities, credit unions, churches, and universities sometimes provide financial counseling.
However, you need to be careful when selecting a credit counseling service. Here is a helpful link with questions to consider when choosing a credit counselor.

For online tools and worksheets to help you pay down debt and develop a spending plan check out the resources below.


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