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Very Effective and Efficient Debt Management
| Posted at 10:34 AM on November 19, 2008 |
Once you have calculated precisely how much money you owe then it is time to create a budget that will help you to use your income more efficiently by covering all your necessary expenditure and working towards the elimination of your debt.
A budget can be prepared in a book or more effectively online using a program such as Excel.
Now when you prepare your budget you need to take into account everything that you can think of relating to income and expenditure and this budget will need to be updated on a regular basis as more things come to mind when there are changes in your financial position.
This is why it makes it a lot easier to use a program such as Excel where totals can be added quickly and you will be able to see in a matter of seconds which direction you are going in and whether the steps that you have made have resulted in positive changes towards your financial well-being.
Where you are unsure about specific parts of the budget such as how much money you spend per week on food and other essential items, you will have to make an estimate initially until you are able to take notes the next time you go to the shops and see precisely how much you spend.
Once you get some of these figures you will be able to determine whether you are overspending in particular areas and what you can do about reducing such expense.
Your food shopping is one area where you can save a considerable amount of money because most people don't have any strict limits on their food spending.
Once again changes can only be made if you know precisely what you've been doing in the past and where you can make the changes in the future.
It might mean that you have to completely change the types of foods that you are buying and often the benefit of doing this is you improve your health along the way by buying food that is better for you.
Budgeting is your way to gain control over your finances once again. In fact it is the only way for you to gain control. It is a lot easier than you might expect and once you begin to use a budget you will wonder how you ever managed your finances in the past without having a budget.
Making the Right Moves when Debt is Excessive.While the budget will help you to manage your debt and to begin eliminating outstanding debt if you have excessive amounts of debt then you are going to need to take a little more action to reduce the impact this will have on your life, your credit rating and your future. If you have a lot of creditors or a lot of debt owing to creditors then you will probably need to contact them and try to work out some deals were you can pay them off in installments over a period of time that is manageable. If you're already paying installments then they might need adjusting so you can handle them more easily. Your budget should have the details of all of your outstanding debts and the amounts that you should be paying. With this information you can work out accurately how much you can afford to pay and then present that to your creditors to see that they are happy to allow payments at a reduced rate if necessary. Expect them to try to pressure you into higher payments but if you let them know that your budget only allows for a specific amount to be paid per period then more often than not they will agree to it knowing that the debt will get cleared in that manner. Sometimes it is necessary to borrow more money to pay off existing debt and while you will be reluctant to borrow money it can be beneficial where consolidation of debt reduces costs in the form of penalties and interest. You should only borrow if you can find money at a lower interest rate than the debt that is currently owed. You can also get help from good credit counseling agencies that will help you to prepare a budget and negotiate with your creditors to reduce payments. Often they will give you other advice that will help with the management of your finances and will be invaluable to helping you improve your financial position. And finally if worst comes to worse and you really can't afford to pay off the excessive amount of debt that you have built up there might be no alternative but to file for bankruptcy. You will need some professional advice as to when and how to do this as it can make the difference between eliminating your debt completely or alternatively giving you three to five years to pay off what is owed.
Managing Debt Collectors Debt collectors have a job to do and they are paid accordingly as a percentage of the amount of money that they recover from you. Obviously it is in their best interest to recover as much money as possible and many of them will resort to all sorts of tactics in order to extract funds from you whether you can afford it or not. Debt collectors are also aware that the majority of people don't know the laws as they stand with their powers of collection and the rights you have that cannot be violated. They are only allowed to contact you between the hours of 8am and 9 pm and if you send them a written letter not to contact you again in relation to a particular debt they have to abide by that request and can only contact you again to inform you of any further action they will take in the recovery of the debt. They cannot contact you at your place of employment if you inform them that this is not allowed and they are not allowed to contact you excessively as this is classed as harassment. Obscene or insulting language is also not allowed although many debt collectors will use such tactic to intimidate people and get them to pay more than they can comfortably afford. Many debt collectors will buy your bad debt off your creditor and then it is up to them to recover their money from you so they can get quite aggressive in their recoveries. If you are in a position where you are expecting a debt collector, know your rights and don't allow them to 'bully' you into making a payment that you can't afford. Sometimes you will be able to discuss an arrangement with them to pay off the debt and this is obviously the best solution as they will get their money eventually and you will be able to pay it back at a rate that your budget has determined most suitable. Always try to work through your money problems with those involved in an amiable manner as this is usually where you get the best deals that will keep both parties happy.
Take Care of the Most Important Debts You need to prioritize your debt repayment and ensure that the most important debts are taken care of first. The importance of the debt is determined by the impact that it can have on your life both now and in the future so clearing past due taxes would be one of the first debts that you would have to look at due to the penalties and compounding interest that you will have to pay and the fact that the IRS has so many powers to seize assets and make life very difficult for you. A mortgage is another debt that needs to take top priority as losing your house can impact on your ability to pay all your other debts and also make it difficult for you to find accommodation elsewhere. If you don't have your own home then you need to ensure that your rent and utility bills are kept up-to-date so you have a roof over your head and are able to live in suitable conditions to be able to work your way through your money problems. Your budget will give you a clear indication of the total amount of debt that is owing to others and from there you can set your priority list where you can start working with the people you owe money to and sort out payment plans with your creditors and your own steps to clear your debt. Medical bills and court-ordered child support debt are also high on the priority list as failure to pay these can result in drastic action being taken that will once again make it difficult for you to work your way through your other debts. Car loan repayments are a priority because car finance companies will quickly repossess your car if you fall behind with the payments and this can impact on so many other areas of your life such as your ability to get to your place of employment. Don't be forced into paying minor debts at the hands of debt collectors if you haven't covered these priority debts first.
Understanding Debt Better Not all debt is bad and while you might consider it to be so at the moment when all you can think about is the overwhelming amount of debt that you need to repay and the problems that it has caused, you will also need to understand that often it is worthwhile having debt. For a start having debt on appreciating assets such as a mortgage on your home can be a good thing because the value of your house will be increasing at a rate that is far greater than the amount of money that you could save and quite possibly you would never be able to save the amount of money required to purchase a house in the first place. For most people this will be the only type of debt that is worthwhile having simply because the advantages far outweigh the cost of the debt in the form of interest. The debt that is incurred for purchasing items that can't be regarded as assets, for example motor vehicles where they are depreciating and you are losing money the longer you own them, can't be regarded as good debt. Credit cards are one of the biggest causes of financial problems in the country but they too have their uses and in particular when you're trying to rebuild your credit history by taking out smaller amounts of borrowings and paying them back on time all the time. Getting small amounts of credit card debt and repaying it, can help you to move on to personal loans and then eventually you'll have the opportunity to get a mortgage to purchase a house again even if your past create history has been bad. So you can see that in the right circumstances there are various reasons why debt can help you have a more fruitful life. Racking up restaurant bills and purchases of the latest fashion items on your credit card can never be regarded as good debt in anyone's books.
Improving Your Credit History Improving your credit history is basically about doing the opposite to that which caused you to get a bad credit history in the first place. You got a bad credit history by not making good the debt that you owed to other people either on late payments or failure to make the payments at all. This bad credit history remains in your name for 7 1/2 years and any time you go to borrow money, rent accommodation or virtually anything else that involves the need to check your credit standing you are going to be at a disadvantage. So what can you do to make up for your past errors? Simply by doing the opposite to what you did in the past and borrowing small amounts of money but ensuring that you pay them back on time all the time to start to build up a good credit history will begin to compensate for your past efforts. When many people get on top of their debt problems they are very reluctant to go back to borrowing again however in order to get your own house and a mortgage that will be necessary in order to buy it, you need to start rebuilding your credit history and unfortunately the only way that that can be done is by borrowing and proving that you have changed and can meet your responsibilities to the financers. You don't have to borrow a lot of money and in fact it is better to do smaller amounts at various different places so you get good credit reports from a wider range of people. Credit cards are the easiest way to get started rebuilding your past and then buying the occasional item provided it is a necessity and at low cost on hire purchase where you make monthly payments over a set period of time and don't miss any payments as the next step towards your goal of getting lending institutions the confidence to work with you further.
Understanding Why You Spend We all have reasons why we spend and aside from the necessities in life many of us love to spend for various different emotional reasons. Just as some people 'reward' themselves or find comfort in chocolate there are many more who spend money in response to certain emotions. Are there occasions in your life when something has happened where you immediately feel like you need to go out and celebrate by either buying something or having a meal at an expensive restaurant? Many people buy material items in an attempt to make them feel better about themselves. It is not uncommon for people with low self-esteem to spend money on items that they think will give others a higher opinion of them. People buy expensive cars or yachts to boost their ego. Some people buy when they are happy and some people buy when they are sad. Many people these days buy with no thought about the future and the fact that they are going to have to pay off the debt that they have just incurred today for the next year or so. Impulse buying can be particularly dangerous as it is generally for items that you don't need and the debt that comes with these types of purchases is something that you definitely don't need and will possibly regret for a long time. If you can define precisely why you buy then you will be in a lot more control over your financial future and you will understand that the short term benefits that you get from your buying sprees are certainly outweighed many times over by the stress and worry of the financial burden that they bring with them. It might even be necessary to see a professional for consultation to help you change these bad habits that are getting you into financial strife on a regular basis. More often than not they are just bad habits and we are unaware of what we do a lot of the time.
Income and Spending Gathering the information necessary to compare your income with your spending can be quite eye opening for most people. By doing this over the period of the last year you will get a better understanding of where your money has been going and why you have landed in a situation where the debt is overpowering you. The income is easy to sort for those people on wages as that will be fixed for the year and it would be relatively easy to make a list of the fixed expenses such as your rent or mortgage your insurances and other such factors where you know the exact amount that you will be paying each month. You can make estimates of how much you spend on your shopping for necessities and while you might make an attempt to calculate how much money you fritter away from one week to another almost everybody who does this exercise finds that they have underestimated considerably the amount of money that they have been spending. If you are able to calculate how much money you had in the bank and how much debt you had at the beginning of the year and then add and subtract your income and your expenses as you have already calculated them you should come up with a balance of where you would expect to be now. The next step obviously is to calculate exactly where you are now and the difference between that figure and the previous figure is the amount of money that you have frittered away without realizing that you've been spending it. So where did all this money go - you might ask yourself. Often it's the little things that you don't consider worthwhile recording such as the cup of coffee you have every day with the occasional take-away that you have once or twice a week. Maybe it's the magazines that you buy each week or some other relatively small expense that adds up with all those other relatively small expenses to create a big deficit in your finances over the term of the year or so. These are the areas where you can cut back or eliminate spending that will have a huge impact on your ability to reduce your debt and remain debt free once you have put yourself in that position. Many little expenses add up to one big debt.
Changing Your Attitudes to Money You will begin to understand why there is a need to change your attitude towards money as it can make your life a whole lot easier if managed correctly just as it can present you with ongoing stress if it is mishandled. The fact that you have created a problem of excess debt is due to having the wrong attitude towards money. By going through the process of preparing a budget and seeing exactly where your money has been going and how much waste there has been you will be able to change your ways and never get in a similar situation again. When you consider the things you might have been able to do with that 'lost' money you will begin to see that the alternatives are very often so much more appealing and the habit of frittering away funds will be able to be corrected. Often the amount that people waste on minor expenses, such as daily coffees and takeaway foods can represent a luxury holiday once a year and surely that would be much more appealing. Money is not something that can solve your emotional problems and spending money on luxury items that aren't necessities might give you some short term satisfaction but the long term stress and worry that excess debt brings with it is something that I am sure you will want to avoid ever having to deal with again. It is your choice to take charge of your finances and it is as simple as starting a budget and setting realistic short term and long term goals and then making those goals become a reality. Money can make you very happy and give you an excellent lifestyle if it is managed properly but even those who are earning huge incomes frequently fall into financial strife due to an inability to manage their finances. If you follow the proven steps to financial survival you will be better off than the majority of people and in the long term you will be able to afford more of the things that you desire than you would do otherwise. Your attitude towards money and debt has a huge bearing on the quality of your lifestyle.
Managing a Budget Deficit If your expenses are greater than your income then you have to contend with a budget deficit and there are only two ways you can deal with this. You can earn more money or you can spend less - it is as simple as that. Unfortunately it is easier said than done some of the time and that's why many people get into debt in the first place by topping up the deficit with money from credit cards and other high interest loans. Your budget will help you to focus on areas where you can cut your spending. Obviously you will be looking at luxury items first and those non-essential items that will be easy to eliminate. If you can eliminate your budget deficit by getting rid of these non-essential items then you are in luck however it might not be quite that easy for you to reduce your spending enough to make up the deficit. If that is the case then you will have to go back over your budget again and see the areas where you can cut your spending to try to close the gap between income and expenditure. If you are putting a percentage of your income aside a regular basis for some type of saving scheme then you might need to consider canceling that saving until you have managed to reduce your debt to such an extent that you are able to cover your costs with your income. Once all areas of cost-cutting have been exhausted you are left with the only other alternative of increasing your income and you will need to look at whether you're able to increase your hours of work or possibly even get a second job to bring in enough additional income to cover your expenses. One way or another unless this budget deficit is eliminated you will be destined to continue accumulating debt and the more you do that the more difficult it will be to bridge the gap.
Which Debts Need Paying First The debts that need paying first are the ones that will cause you the most grief if left unpaid. It goes without saying that taxes are at the top of the priority list as the IRS has more powers than anyone to recover the monies owed to them and failure to pay their account on time will not only result in interest but also penalties that can quickly mount up to more than the original debt. Medical debt is also high on the list of priorities and it is essential that you look after your health and that of the members of your family. Without good health you will need more money to pay for your health care and if you can't provide sufficient health care for yourself and those who are under your care then the long term problems that can come about from that are often much more costly than the original debt. Student loans and child care support are both top priority as they are debts where government departments get involved and they have wide reaching powers to recover monies owed to them to such an extent that they can actually make your debt reduction program more difficult to achieve. You should learn to prioritize all aspects of your life from the debts that you need to pay first to the tasks that you need to get done each day. Time management will help you through your daily tasks and financial management will ensure that you have the least problems possible with your creditors by paying those who must be paid first. Just because a debt collector starts putting pressure on you to pay a minor debt doesn't mean that other more important debts should wait for payment. Take control of the situation in all instances where possible and stay with the budget and the process that you have created for efficient debt control.
What to do with a Budget Surplus Where there is a budget surplus you should apply those funds towards clearing the debt that you are paying the highest rates of interest on. Where you have accounts that offer a discount for early payment you should also take advantage of those discounts by applying the budget surplus towards them. Until you have cleared your debt you shouldn't consider using the surplus for investing, as the money you will receive from the investment, less the tax that you will pay on that income, will be less than the amount you will save in interest payments for clearing debt. Always look for the most benefits for each dollar spent and in almost all cases there is no better benefit than clearing debt. Of course once you get to the stage where you have your finances in order and everything is under control budget surpluses can be better spent on investing in appreciating assets such as property, provided the property market is rising, and only where you will be able to make more money from borrowing to buy the property than you would using the money elsewhere. That is something you can look forward to once you have managed your debt and with your ability to budget well you will be able to calculate the ratio of income to expenditure and determine whether it is a good investment that you will be able to handle comfortably before you spend your money. You will be able to make all your decisions based on simple steps that will eliminate all the guesswork and ensure that you don't get into financial difficulty again. Sometimes you only need to change a few factors in your life to go from a budget deficit to a budget surplus and that is what you will be aiming to do as soon as possible. The more of the budget surplus you apply to debt the bigger the surplus will become and this affect begins to accelerate over time.
Slashing Your Spending The first step towards eliminating debt is to look at all areas of your spending and slash the items that aren't vitally necessary for your survival. You are in survival mode now so you need to think in that manner. Luxuries are off the menu until you are in a position to sleep peacefully at night and not fear the phone ringing thinking it is a debt collector on the line. Day to day spending of 'petty cash' adds up to a considerable amount over the course of a year and it could be enough to clear one of your outstanding high interest debts. Even buying one coffee a day can amount to quite a bit of money at the end of the year. Not only will that reduce part of your debt but you will also be saving interest that you would have been paying on that debt and the compound effect is more significant as time goes by. Making your own lunch and taking it to work rather than buying it from the shop can also save a lot of money and you might be doing your health a lot of good in the process by eating better food. Cooking your evening meals at home rather than going to takeaways or restaurants is one of the best ways to start slashing your spending. Maybe you spend a little too much on clothing and you really don't need to have the latest fashion item when other suitable clothing is still hanging in your closet unused. Are there any places that you could walk to rather than drive the car and save money in gas? There are so many small areas where it is quite easy to slash your spending without impacting on your lifestyle all that much and it is these little drains on your income that are happening on a regular basis that are responsible for a lot of the debt that you have to be concerned with today. This is the sort of money that you don't even notice going out of your pocket but you do notice the debt that accumulates because before you know it your creditors are knocking on your door asking for repayment. Prepare a shopping list before you go shopping for groceries and make sure you stick to that list rather than buying anything that catches your eye while you are in the supermarket. Supermarkets are designed specifically with the way the items are placed to make people buy and having a list of items you require before you enter the shop makes it a lot easier to manage the temptation that they put before you to buy. Write down every dollar that you spend for the week and then add that spending up to see just how much money you waste without realizing. Add this to your budget and then work towards slashing as many areas of spending as possible.
Making More Money Besides reducing your spending and making the most of the money that you earn the other way that you can reduce debt faster is to make more money. Whether you are self employed or work for a wage you should be looking at ways to work longer hours where possible to make more money. There are two opportunities to get ahead when doing this. Firstly the increased income can go directly towards reducing debt and by doing that you will be reducing the interest you will be paying on that debt and secondly there is the added benefit of the fact that you be either too busy or too tired to spend money elsewhere. Even if it is only for a short term the additional money that you will earn and can mark off against your debt can have a huge impact on the time that it will take you to reduce and eliminate your loans. You might be able to refinance some of your loans for a shorter term by being able to make bigger monthly payments. The additional money gives you more control to budget better and to make the most of discount opportunities and interest rebates for early repayments of loans. If you are already working long hours and can't possibly fit in an additional job or more hours at your current job them maybe it is time to start looking around for other employment that pays you more. There are always other opportunities and even a small increase in income might be all you need to get over the next hurdle. Ask for a pay rise and you might be pleasantly surprised to find that you get one. You need to think in a manner that you have to survive and you should take the courage to do all that you can to get through your financial turmoil. What is worse - The stress of debt or the fear of asking for a pay rise? You need to take action right now and you can change your future. The benefits are too great to let opportunities go by without seeing if they are available. When it comes to debt management there is no better time than right now to make proactive steps towards resolving your problems.
Handling Your Creditors What is the best way of handling your creditors? You will need to look at things from their point of view to understand the way that they will react to the fact that you haven't paid your account. They have given you a product or service that has cost them in time or money and all they expect in return is for their account to be paid. They are trying to run a business and for all that you know they might be faced with financial difficulties themselves where they are reliant on getting the accounts paid on time to cover their expenditure. So when you are faced with a situation where you can't pay your creditors you need to contact them as soon as possible to explain the situation and assure them that you will pay the account as soon as you can. You need to make them feel satisfied that they will be getting their money even though there will be a delay and that delay has only been caused because you simply have no alternative. This communication will reduce the chances of creditors taking legal action against you to recover the money. It will make them feel a lot more comfortable than for you to remain silent and not let them know what is going on and have one month dragged into the next when your account hasn't been paid and they become ever more frustrated at the fact that you are not responding to their requests for payment. Treat them as you would hope to be treated yourself if you were in a similar situation. Remain in contact with them on a regular basis even as you are paying off your old debt to keep assuring them that full and final payment will be coming. This will help to build some form of trust between you and your creditor and they will begin to understand that you are making a concerted effort to clear your account.
Consolidating Your Debt Consolidating your debt can help you to manage your debt more easily by helping to pay off many creditors at once with the use of another loan. While this is generally only a transfer of debt from one place to another you can often get better interest rates on these new loans, particularly if you get it through your bank as a personal loan or by using your home as equity and that in itself can save you money. By consolidating your debt at a lower interest rate you will be able to reduce your debt faster and in the process have the ability to pay off your high interest debts sooner. It might also give you the ability to take advantage of saving money by making your loan repayments earlier and sometimes you can get discounts for paying debt on time. Having one loan rather than a number of individual debts can make your budgeting a lot easier and can also reduce the number of debt collectors who could be calling at your door seeking payment of outstanding debts. If you do decide to consolidate your debt then calculate precisely how much you need, to cover the various debts that you want to clear, and use the new loan to pay off that debt immediately otherwise you might be tempted to use the money elsewhere and in doing so create even more debt. It might even be worthwhile having your new consolidated debt payable over a longer term to reduce your monthly payments and help you to focus on other more important or higher interest debts sooner. The whole idea of debt consolidation is to improve your financial position and you should be looking at ways that you can do this. You must make sure that the interest payable on your new consolidated debt is fixed at a rate that you can budget for as it is too risky getting a variable interest rate loan where the rates could rise and leave you in a more difficult position than you would have been had you not consolidated. If you are working with a credit counseling agency then discuss your intentions with them beforehand and get their expert advice on what the best solution for you will be.
Credit Counseling Credit counseling agencies can offer you a lot of help in reducing your debt. With the experience that they have they will be able to quickly sort out a budget for you and show you how to manage your budget, your income and your expenditure. Get recommendations from people within your area who have used specific credit counseling agencies and have been pleased with the results because there are many who don't deliver what they say. A good credit counseling agency will be able to review all aspects of your budget and set you realistic goals that you will be able to achieve. They will understand your requirements and help you to work around your problems while still maintaining a reasonable standard of living. They will review all your finances and make suggestions on whether or not you need to refinance, consolidate your loans, or anything else that needs immediate attention. If you find yourself a good credit counseling agency they will work with you over the long term tuning your budget to suit as your needs change and your debts decrease. They can also help you come to arrangements with your creditors and other lenders to help you pay off your debt and to ward off legal action for the recovery of outstanding money. Check their fees before employing them as there are many who charge excessive amounts that will get you into more debt than they can help you get out of. Some of these agencies are non-profit but don't assume that they are without checking their credentials and that can be done by getting a copy of an IRS approval of non-profit status. The genuine non-profit credit counseling agencies will be the cheapest but just because you won't be shelling out a lot of money doesn't mean you won't be getting the best of advice. Often these non-profit organizations have a better understanding of the difficulties that the ordinary person faces handling their finance. If you are to expect the best results then you will have to reveal everything you can about your income and expenditure, your debts and the problems that you have had with payment of your debts, and your credit history. It is only when they have the full picture that they will be able to make the best decisions to see you progressing towards your goal.
Managing Past Due Mortgage
Nothing damages your credit history more than a foreclosure so you will want to avoid it at all costs. Add to that the emotional strain of losing your most valuable asset and the time and effort that has gone into building your equity in your home and you can see why it is ranked as one of the most distressing events that can happen in a person's life. The information here is a general overview of the terms that apply to most mortgages. You will need to check the terms of your mortgage to ensure that the same terms apply to you. You will have 15 days after the due date for payment before you will be charged any penalties for late payment of your mortgage. After that you will be charged a late fee and the bank will generally contact you to find out when payment will be made. Once 30 days are up and you haven't made payment the bank will most certainly be in contact and need information as to why you haven't paid them. If you are still having difficulty making the payment then you should contact one of the government agencies such as the U.S Department of Housing and Urban Development to get some assistance to work with your lender to resolve your payment problems. Between 45 and 60 days the process moves to the next level where the lenders attorney will get involved and issue you with a notice of default which will detail the amount you need to pay to clear the arrears unless you have already contacted your lender to come to an arrangement for payment. After 60 days if nothing else has been worked out you will get a notice of acceleration which means the total amount of your loan and not just the past due amount is payable in full. You will also be told the date when your property will be sold to cover the mortgage if you can't pay it beforehand. This is the start of the foreclosure. You still have time to avoid the loss of your house at this stage however the longer things are left the harder it gets to retain ownership. Even after 3 months and before the house gets sold the lender will usually be happy to come to a suitable arrangement where you can clear the past due and get your payments current again. This also depends a lot on your past history and whether you have regularly missed payments. If you fear that you will be unable to make the necessary payments due then make sure you take action as soon as possible. Contact a bankruptcy attorney as this will halt the foreclosure and allow you some time to decide whether there are any alternatives that you can look into.
Automobile Debt
Along with credit cards automobile debt is one area that gets a lot of people in financial strife. Most people don't realize that one of the most profitable parts of the car dealership business is in the financing of the motor vehicles. There is often more money to be made from the financing than from the sale of the vehicle itself. And guess who pays for it? You do! And you pay considerably more for it than you would from many other types of borrowing. You are probably paying interest on not only the purchase of the vehicle but also the insurance, the warranty and any other additional items that the dealer talked you into at the point of sale. This makes for a very expensive vehicle and before many people know it they find themselves in difficulty making the monthly payments. So how do you get out of the situation? You need to consider what alternatives you have to reduce your automotive debt and that might mean selling your expensive motor vehicle and getting something a little more realistic considering the situation you are in. Cars are very often an emotional buy, where the impression that your new vehicle might have on friends, family and neighbors might influence your decision into buying a more expensive vehicle by borrowing more. You need to look at it a bit more realistically and consider what you have to deal with on a daily basis trying to make ends meet due to your car payments and then look for a better alternative. If you can manage with one car rather than two, then offload one and use the money from that to reduce debt. If you can get rid of your expensive vehicle that you have financed and have sufficient funds to pay cash outright for a lower grade vehicle, provided of course that it is reliable, then that would be a wise move and have a huge impact on your monthly budget. It could also be the fast track you need to get back into a better vehicle sooner without all the debt.
Keeping a Place to Live
It can be very frightening to get an eviction notice or to find that the bank is going to foreclose on your house mortgage. Having a roof over your head is one of the essential requirements that you expect to have for you and your family and to see that security disappearing due to your inability to pay your debts is one of the worst things you could imagine. No matter how well you get on with your landlord you have to understand that at the end of the day it is purely a business arrangement for him and money is all that really matters. It might be that the landlord is also working on a tight budget and needs your weekly payments to pay for his debts. The first thing to do is to pay the past due amount as soon as possible. If this is not possible then work through your budget and see how you can make payments to reduce the amount as soon as you can. Once you have some figures approach your landlord and discuss your situation fully and present your plan to eliminate the debt. The peace of mind that you give your landlord for doing this might be all that is needed to avoid an eviction. In some situations you might even be eligible to qualify for government assistance or you could possibly get help through a church group that you belong to. You need to start asking around to find out what all your options are and the sooner you do that the better. You might even be able to negotiate with your landlord for a reduced rate for a specific period of time to get back on your feet with the assurance that you will pay the deficit at a date that you both agree on. Failing that you might need to cancel your lease or sub lease the accommodation to someone else while you find cheaper residence elsewhere. Getting a roommate is another alternative that will help to share the expense. You need to do all you can to avoid eviction as quite apart from the inconvenience of the eviction you will find it more difficult to find new accommodation with reference to your eviction on your credit report. You might have to pay a larger than normal bond on any new rental accommodation due to your poor history.
Medical Bills As one of the leading forms of consumer bankruptcy medical debt is a major problem that many people had to contend with. Even if you have health insurance there are quite often additional expenses when medical care is needed that can amount to quite a large sum of money. Unfortunately for those people who are already having difficulty in paying excessive debt, they quite often have to stop paying medical insurance to cover their other financial needs. Without health coverage medical bills can build up to such an extent that there is never any likelihood of a person being able to afford to pay them. It is easy to see why so many people are made bankrupt due to their medical debt. Unfortunately the medical practitioners are getting tougher on having this debt paid and resort to all means available to them for the recovery of their money. This can mean you will be getting a visit from a debt collector to recover the funds or the medical practitioner might decide to sue you for the money in which case your assets can be seized and your bank accounts frozen. There are also becoming many more instances where people are refused medical attention simply because they haven't paid the past due debt and only cash upfront payments will see that they get the medical attention that is needed. This is even happening to people who have been having ongoing medical care by a practitioner and have been unable to pay the full amount of that care to date. Even care for serious health problems has been refused due to monies owing. Where possible you should always try to keep some form of health insurance cover and when needed ensure that they pay for everything that they should. Review the expenses that are charged to you and be sure that they are correct before paying as it is common for errors to be made that can be extremely costly particularly when you're already having difficulty making ends meet. There are some options available where you can get medical discounts and if so make the most of these and get all you can. These apply particularly to people on low income and those who don't have any form of health insurance. Consider getting Medicaid which is available in most states to help cover any future medical expenses and also help to pay medical bills up to three months old. Ask if you can set up an installment plan to pay off your past due medical bill to allow you to continue to receive medical care from your practitioner. Always look at all the options that you might consider available to maintain proper health care.
Child Support
Child support is a high priority debt that you must pay no matter how difficult your financial position might appear to be. There are a number of reasons why you need to make child support payments top priority. Quite apart from the fact that your children shouldn't have to suffer for your financial dilemma and the necessity for you to provide them with the necessary support to ensure their welfare is looked after, you also need to be aware of the consequences of not paying child support. Any child support court order that was written or modified after the 31st of December 1993 will automatically be deducted from your wages if you are employed. If you are self-employed or unemployed you are still legally required to make the necessary payments. Your failure to do so can result in various different actions being taken against you including debt collectors coming to retrieve the necessary funds, getting issued with a court order to recover the outstanding money or in some circumstances you can be put in jail until you make your past due child support payments. You can see now why Child support is a high priority debt that needs to be paid before many other debts. There are State Departments that have wide reaching powers to collect the past due money. If you can't pay this money then contact them as soon as possible and work out an arrangement where you can pay off the outstanding amount by installments and then include this into your budget and prioritize it accordingly. There are so many other areas that are affected by non-payment of child support that can impact on your ability to clear the rest of your debt including the sale of your assets to cover the cost and liens on your assets to stop you borrowing against them to clear debt. Once your past due amount exceeds $1000 the debt will be reported to the credit reporting agencies and anyone who accesses your credit reports such as creditors, insurance companies, landlords and so on will see that you have fallen behind in your payments and this certainly doesn't help your cause when trying to sort out your debt problems. Make it your priority and make your life easier in the process.
Paying Overdue Taxes
It is top priority to pay all your overdue taxes as soon as possible due to the compounding problems that occur. With penalties and interest on overdue taxes it doesn't take long for the total to mount up where you will be paying more for those than the original amount outstanding. Federal taxes are one of your most important debts to clear as there is no one quite as ruthless at recovering debt than the IRS. They have more powers than anyone else to recover debt. They can take assets to cover the debt and that even includes your home so you don't want to be messing with the IRS. If you know that you won't be able to pay your tax when it falls due then you will need to look at all alternatives and that might even include the necessity to use your credit card to pay your account simply because that will be an easier debt to manage than the IRS and the interest and penalties that they will impose. If you have enough equity in your home then that is another solution because the interest you will pay on your home mortgage will be a lot less that the IRS interest for late payments. You will probably be reluctant to use your house to borrow the money, and rightly so, however in the case of federal taxes you could stand to lose your house if you didn't pay anyway. If you have already incurred penalties and interest for outstanding taxes then it is possible to come to an arrangement with the IRS where they will reduce some of these charges provided you can offer them some reasonable explanation as to why this happened. An example of this would be an illness that stopped you from working and earning enough money to make payments. Often you can arrange a payment plan with the IRS to pay off your debt and if they agree to that use your budget to work out how much you can reasonably afford to pay without getting in difficulty and defaulting. Once you get a payment plan sorted you won't want to miss any payments under any circumstances. #BREAK# #TITLE#Student Loan Debt#/TITLE# The percentage of people who are getting behind and defaulting on the repayments of their student loans has been steadily increasing over recent years. It can be very difficult when you finally graduate and find that you owe thousands of dollars in student loan debt and the job that you have isn't paying quite enough to cover all your living expenses and the payments required on your loan. Many students get into difficulty paying back their loans and they begin their working career with bad credit due to defaulting on their loan. You don't want this to happen and you will need to factor into your budget the repayments of the loan. While payment is due once you graduate or stop with your education there is often a grace period of 6 to 9 months after that date, depending on the type of loan that you have. The first thing you will need to do if you are having problems paying is to determine what type of loan you have and what options are available to you. This grace period will give you time to find a job to help make the payments. With some loans you will begin to make interest payments immediately whereas others will allow you to pay the interest over the term of the repayments or at the end of the repayment of the actual loan. This is why it is important for you to find out what type of loan you have and what options are available to you to help with your financial planning and make sure that you don't default on the loan repayments. If you do default on the loan there are various consequences that you need to be aware of. The full amount of the debt could be called up for repayment in total or it could be turned over to a debt collection agency. You could incur additional late fees and collection fees and your credit history will be damaged. There are many more areas that will impact on your life so it is wise to work through any issue with your lending advisor and do so with the assistance of the budget that you will have already prepared. They might be able to arrange a consolidation of debt that you help you pay off your loans at a lower interest rate thereby reducing your overall payments that need to be made each month.
Improving Your Credit Rating
Once you have paid back your outstanding debts you can concentrate on rebuilding your credit rating. Although you can't do anything about the bad history that you have and the fact that previous debt problems will show on your credit report for 7 ? years you can start to rebuild your credit and eventually have more positive information on your credit report than negative. You will do this by applying for small amounts of credit and paying them off on time all the time to start building a good credit record. You should only start doing this once you have sorted out all your debt problems and are in a financially stable position where you know that you will be able to make all your payments on time. If there were specific reasons why you got in debt in the first place that haven't been completely resolved then it would not be wise to get this additional credit until you have that part of your life sorted. You will only get more credit after you have created an updated budget that will allow for the repayments and show that you will be able to manage the new debt repayments without undue stress. Lending institutions will look at the positive results you have had with your credit in more recent times and this will make it easier for you to deal with them in the future. While you will be wary of getting credit cards again, and rightly so, they can be useful for rebuilding your credit. To do this you will get a card that has a relatively low interest rate and a small credit limit and you can use it to buy essential items only. You will need to pay back the full amount at the end of the month so you don't start building debt again. If you purchase and pay back within the month you won't be incurring interest charges but you will be building a better credit rating. Later you can make some bigger purchases on essential items once again and then pay them off over a period of time making sure that you always pay the minimum amount required, or better still more than the required monthly payment. After you have had your credit card operating successfully for some time and paid it off you can apply for personal loans and build your credit by paying them back in full, on time, all the time. Eventually people will be more interested in your recent good credit history and they will not focus on the problems that you had in the past.
Once You Have Control of Your Debt
It is a great feeling to get on top of your debt and know that you are able to make all your payments each month and not have to worry about debt collectors or paying for your groceries but now is not the time to stop doing the things that have helped turn your life around. You will have become accustomed to using a budget to get your life in order and take control of your money and this budgeting should continue so you can move to the next level where you have additional money that can be used for investment and adding security to your life as you age. You will probably have a different outlook on life where you understand the difference between wants and needs and as you will have experienced the lows of constant financial stress you will not want to go back there in a hurry. So continuing along the proven path to financial security of reducing debt and managing the daily flow of your cash will give you a lot more freedom to build wealth now rather than focusing all your energy on reducing debt. It is a more positive phase in your life and you will see how much the debt encroached on your lifestyle and freedom. You should have adopted an attitude whereby you will only ever spend less money than you earn and where you will never buy luxury or non essential items if you have to go into debt to get them. You will only consider debt if it is to buy an appreciating asset that will deliver you more return for your money than the amount you are paying in interest. This new attitude will also include better time management skills and that in turn will give you more time to do the things that you like. While those times of excessive debt are extremely hard to handle the process of reversing your monetary situation is an education that will set you up for better things in the future.
Ignoring Your Debts
Ignoring your debts won't make them go away. As much as you would like to think of something else you cannot address the situation without facing it. If you put your head in the sand then someone is going to come along sooner rather than later and give you a big kick in the butt and it's going to hurt because you won't see it coming. That kick will come from a creditor who you haven't contacted to work out an arrangement for payment of an outstanding debt or possibly even the bank with a notification of a pending foreclosure on your house. You might find yourself getting a notice of eviction simply because you didn't contact your landlord to make a payment arrangement while you get your finances sorted. You need to face the facts that you have a problem and then set yourself goals to resolving the problem. Problems that are left usually present themselves as bigger problems a short way down the line so today is the day that you need to start looking at your debts. Taking action now can result in savings of interest and late payment fees. People who have money generally pay less than those who don't because they are able to pay debt on time and don't have to fund the additional expense of late payments in one form or another. There is one thing that is certain and that is the fact that people who owe money might forget what they owe but those who are owed always know how much is due, so you might prefer to forget but your creditors won't. Also - more often than not a creditor will adopt a far more positive attitude towards you if you explain the situation you are in and let them know that you are currently working towards full and final payment of the debt as soon as possible. Communication can do wonders for your debt reduction program.
Missing Your Car Payments
Missing your car payments can create all sorts of problems in many different areas. As most of us rely on a car to get us to work it is essential to make sure you have enough money set aside to make the payments and if your budget shows that this is placing too much of a strain on your finances then you might need to downgrade to something more affordable. Finance companies are legally entitled to repossess your car without getting a court order if you miss your payments and they can do so without warning. When this happens the repossession will be noted on your credit records and will remain there for the next seven and a half years so this is one area of your spending where you will need to make the appropriate decisions in advance of anything happening. Once your car has been repossessed the finance company will generally advertise it for auction to help recover the outstanding amount of the loan. Unfortunately for you the problem of debt doesn't stop there. If the vehicle is sold for less than the amount still owing on it, plus the costs involved in repossession and selling the vehicle, then you will be liable to repay that deficit to the finance company. So you will have lost the use of your car which will impact on your ability to get to work and earn a living and you are still lumbered with the debt that will need to be repaid to the finance company. If you are struggling to make the payments it is better to contact the finance company in advance of any action to see whether you can refinance the vehicle over a longer period where the repayments will be a little less and more manageable. They might also give you the opportunity to pay off any outstanding debt by coming to a suitable arrangement. This could give you enough time to sell the vehicle paying off the loan and finding something that is more suitable for your current financial position. #BREAK# #TITLE#Trying to Get by Without a Budget#/TITLE# Don't even try to get by without a budget as you will be setting yourself up for failure. It's as simple as that. Without a budget you can't hope to have control over your finances as most people will find that once they start doing a budget they realize all the additional expenditure they have in their life that they hadn't noticed in the past. It is the little bits and pieces of expenditure that accumulate into a bigger debt problem. Creating a budget is one of the first things that you should do and using that budget daily will keep you on track to getting out of debt. If someone were to ask you right now to write down exactly how much it costs you to live day to day, week to week, and month to month -- could you do it? If you are honest you would probably have to admit that it would take quite some time as you would have to look through your card statements, monthly bills, shopping lists and more to get a clear picture of what money you are spending. In addition to that you would need to look at any expenses that occur at irregular intervals either quarterly or once yearly. You would also need to make allowances for additional spending during the festive season and the extra interest you would need to pay on the credit card debt that you would drum up over that period. On top of that you would need to make allowances for maintenance on your vehicles and household maintenance. The more you look into the expenditure the more that will be revealed and that is why a budget is so important. Most people get a big shock when they prepare a budget for the first time as they never realize how much money they spend on things that they don't think about. And that is why you must have a budget. There is no suitable alternative. You can't run a business at its best without a budget and you can't run a household without one either. #BREAK# #TITLE#Credits Cards#/TITLE# No doubt if you have got financial problems then you have already got credit cards that are probably maxed out to the limit and costing you big bucks in interest each month. Credit cards have got more people into financial difficulty than anything else and the banks are only too willing to give out more cards and increase credit limits encouraging people to spend more and more money. So what can you do about your credit cards? Well if you are managing to make minimum payments each month the first step is to cut them up and not use them any more because that puts a hold on that source of spending and immediately brings into effect some control over your finances. You should certainly stop using your credit cards but you might need to keep them intact in the interim if you have debt where you are paying even higher interest rates than the cards, to allow you to juggle your money around so you're paying off your high interest debts first. You might be in a situation where your credit cards don't have the highest interest rates of all your debts so rather than paying them off target the other debt before your credit cards. You should look at consolidating your debts and paying off your credit cards with one loan of a lower interest rate. This will not only stop you from buying things on the card but the savings on interest can go towards debt reduction. Credit cards make it all too easy for people with bad habits to slip up and fall back on those bad habits by buying things that they think they need just because they want them. Don't fall into that trap and if you feel that you might then make sure the cards are rendered useless so you can't use them. Consider how good your life would be now if you had no credit card debt and no need to pay installments each and every month. Surely that's enough to make you want to cut them up right now and never use them again. Borrowing Against Your House
There are pro's and con's for borrowing against your home and they all need to be taken into consideration before you proceed with any additional borrowing. On the one hand the money you can borrow on your home will be of a lower interest rate than most other forms of loans and this can help you to reduce your monthly repayments by using the house money for clearing more expensive debt. With the ability to spread the term of repayment over a much longer period you can generally make quite an impact on reducing your monthly outgoings. Use your budget to determine how much you are paying on all your outstanding debt and then calculate what the payments would be if they were all consolidated under the one loan against your house. This will show whether that is the best decision to make to help you manage your finances more easily. Where house prices are rising, you will have increasing equity in the home that will allow you to borrow more against it since the time you originally arranged your mortgage. The downside of borrowing against your home is where you are already struggling to make your home mortgage payments and by borrowing more you will be putting your house on the line and risk losing it. You certainly don't want the banks to foreclose on your loan and if that looks eminent then it would be unwise to increase your borrowings. If you calculate that you will not be able to make the additional mortgage payments then it is better to sell off other items that you have borrowed against to red
Making the Right Moves when Debt is Excessive.While the budget will help you to manage your debt and to begin eliminating outstanding debt if you have excessive amounts of debt then you are going to need to take a little more action to reduce the impact this will have on your life, your credit rating and your future. If you have a lot of creditors or a lot of debt owing to creditors then you will probably need to contact them and try to work out some deals were you can pay them off in installments over a period of time that is manageable. If you're already paying installments then they might need adjusting so you can handle them more easily. Your budget should have the details of all of your outstanding debts and the amounts that you should be paying. With this information you can work out accurately how much you can afford to pay and then present that to your creditors to see that they are happy to allow payments at a reduced rate if necessary. Expect them to try to pressure you into higher payments but if you let them know that your budget only allows for a specific amount to be paid per period then more often than not they will agree to it knowing that the debt will get cleared in that manner. Sometimes it is necessary to borrow more money to pay off existing debt and while you will be reluctant to borrow money it can be beneficial where consolidation of debt reduces costs in the form of penalties and interest. You should only borrow if you can find money at a lower interest rate than the debt that is currently owed. You can also get help from good credit counseling agencies that will help you to prepare a budget and negotiate with your creditors to reduce payments. Often they will give you other advice that will help with the management of your finances and will be invaluable to helping you improve your financial position. And finally if worst comes to worse and you really can't afford to pay off the excessive amount of debt that you have built up there might be no alternative but to file for bankruptcy. You will need some professional advice as to when and how to do this as it can make the difference between eliminating your debt completely or alternatively giving you three to five years to pay off what is owed.
Managing Debt Collectors Debt collectors have a job to do and they are paid accordingly as a percentage of the amount of money that they recover from you. Obviously it is in their best interest to recover as much money as possible and many of them will resort to all sorts of tactics in order to extract funds from you whether you can afford it or not. Debt collectors are also aware that the majority of people don't know the laws as they stand with their powers of collection and the rights you have that cannot be violated. They are only allowed to contact you between the hours of 8am and 9 pm and if you send them a written letter not to contact you again in relation to a particular debt they have to abide by that request and can only contact you again to inform you of any further action they will take in the recovery of the debt. They cannot contact you at your place of employment if you inform them that this is not allowed and they are not allowed to contact you excessively as this is classed as harassment. Obscene or insulting language is also not allowed although many debt collectors will use such tactic to intimidate people and get them to pay more than they can comfortably afford. Many debt collectors will buy your bad debt off your creditor and then it is up to them to recover their money from you so they can get quite aggressive in their recoveries. If you are in a position where you are expecting a debt collector, know your rights and don't allow them to 'bully' you into making a payment that you can't afford. Sometimes you will be able to discuss an arrangement with them to pay off the debt and this is obviously the best solution as they will get their money eventually and you will be able to pay it back at a rate that your budget has determined most suitable. Always try to work through your money problems with those involved in an amiable manner as this is usually where you get the best deals that will keep both parties happy.
Take Care of the Most Important Debts You need to prioritize your debt repayment and ensure that the most important debts are taken care of first. The importance of the debt is determined by the impact that it can have on your life both now and in the future so clearing past due taxes would be one of the first debts that you would have to look at due to the penalties and compounding interest that you will have to pay and the fact that the IRS has so many powers to seize assets and make life very difficult for you. A mortgage is another debt that needs to take top priority as losing your house can impact on your ability to pay all your other debts and also make it difficult for you to find accommodation elsewhere. If you don't have your own home then you need to ensure that your rent and utility bills are kept up-to-date so you have a roof over your head and are able to live in suitable conditions to be able to work your way through your money problems. Your budget will give you a clear indication of the total amount of debt that is owing to others and from there you can set your priority list where you can start working with the people you owe money to and sort out payment plans with your creditors and your own steps to clear your debt. Medical bills and court-ordered child support debt are also high on the priority list as failure to pay these can result in drastic action being taken that will once again make it difficult for you to work your way through your other debts. Car loan repayments are a priority because car finance companies will quickly repossess your car if you fall behind with the payments and this can impact on so many other areas of your life such as your ability to get to your place of employment. Don't be forced into paying minor debts at the hands of debt collectors if you haven't covered these priority debts first.
Understanding Debt Better Not all debt is bad and while you might consider it to be so at the moment when all you can think about is the overwhelming amount of debt that you need to repay and the problems that it has caused, you will also need to understand that often it is worthwhile having debt. For a start having debt on appreciating assets such as a mortgage on your home can be a good thing because the value of your house will be increasing at a rate that is far greater than the amount of money that you could save and quite possibly you would never be able to save the amount of money required to purchase a house in the first place. For most people this will be the only type of debt that is worthwhile having simply because the advantages far outweigh the cost of the debt in the form of interest. The debt that is incurred for purchasing items that can't be regarded as assets, for example motor vehicles where they are depreciating and you are losing money the longer you own them, can't be regarded as good debt. Credit cards are one of the biggest causes of financial problems in the country but they too have their uses and in particular when you're trying to rebuild your credit history by taking out smaller amounts of borrowings and paying them back on time all the time. Getting small amounts of credit card debt and repaying it, can help you to move on to personal loans and then eventually you'll have the opportunity to get a mortgage to purchase a house again even if your past create history has been bad. So you can see that in the right circumstances there are various reasons why debt can help you have a more fruitful life. Racking up restaurant bills and purchases of the latest fashion items on your credit card can never be regarded as good debt in anyone's books.
Improving Your Credit History Improving your credit history is basically about doing the opposite to that which caused you to get a bad credit history in the first place. You got a bad credit history by not making good the debt that you owed to other people either on late payments or failure to make the payments at all. This bad credit history remains in your name for 7 1/2 years and any time you go to borrow money, rent accommodation or virtually anything else that involves the need to check your credit standing you are going to be at a disadvantage. So what can you do to make up for your past errors? Simply by doing the opposite to what you did in the past and borrowing small amounts of money but ensuring that you pay them back on time all the time to start to build up a good credit history will begin to compensate for your past efforts. When many people get on top of their debt problems they are very reluctant to go back to borrowing again however in order to get your own house and a mortgage that will be necessary in order to buy it, you need to start rebuilding your credit history and unfortunately the only way that that can be done is by borrowing and proving that you have changed and can meet your responsibilities to the financers. You don't have to borrow a lot of money and in fact it is better to do smaller amounts at various different places so you get good credit reports from a wider range of people. Credit cards are the easiest way to get started rebuilding your past and then buying the occasional item provided it is a necessity and at low cost on hire purchase where you make monthly payments over a set period of time and don't miss any payments as the next step towards your goal of getting lending institutions the confidence to work with you further.
Understanding Why You Spend We all have reasons why we spend and aside from the necessities in life many of us love to spend for various different emotional reasons. Just as some people 'reward' themselves or find comfort in chocolate there are many more who spend money in response to certain emotions. Are there occasions in your life when something has happened where you immediately feel like you need to go out and celebrate by either buying something or having a meal at an expensive restaurant? Many people buy material items in an attempt to make them feel better about themselves. It is not uncommon for people with low self-esteem to spend money on items that they think will give others a higher opinion of them. People buy expensive cars or yachts to boost their ego. Some people buy when they are happy and some people buy when they are sad. Many people these days buy with no thought about the future and the fact that they are going to have to pay off the debt that they have just incurred today for the next year or so. Impulse buying can be particularly dangerous as it is generally for items that you don't need and the debt that comes with these types of purchases is something that you definitely don't need and will possibly regret for a long time. If you can define precisely why you buy then you will be in a lot more control over your financial future and you will understand that the short term benefits that you get from your buying sprees are certainly outweighed many times over by the stress and worry of the financial burden that they bring with them. It might even be necessary to see a professional for consultation to help you change these bad habits that are getting you into financial strife on a regular basis. More often than not they are just bad habits and we are unaware of what we do a lot of the time.
Income and Spending Gathering the information necessary to compare your income with your spending can be quite eye opening for most people. By doing this over the period of the last year you will get a better understanding of where your money has been going and why you have landed in a situation where the debt is overpowering you. The income is easy to sort for those people on wages as that will be fixed for the year and it would be relatively easy to make a list of the fixed expenses such as your rent or mortgage your insurances and other such factors where you know the exact amount that you will be paying each month. You can make estimates of how much you spend on your shopping for necessities and while you might make an attempt to calculate how much money you fritter away from one week to another almost everybody who does this exercise finds that they have underestimated considerably the amount of money that they have been spending. If you are able to calculate how much money you had in the bank and how much debt you had at the beginning of the year and then add and subtract your income and your expenses as you have already calculated them you should come up with a balance of where you would expect to be now. The next step obviously is to calculate exactly where you are now and the difference between that figure and the previous figure is the amount of money that you have frittered away without realizing that you've been spending it. So where did all this money go - you might ask yourself. Often it's the little things that you don't consider worthwhile recording such as the cup of coffee you have every day with the occasional take-away that you have once or twice a week. Maybe it's the magazines that you buy each week or some other relatively small expense that adds up with all those other relatively small expenses to create a big deficit in your finances over the term of the year or so. These are the areas where you can cut back or eliminate spending that will have a huge impact on your ability to reduce your debt and remain debt free once you have put yourself in that position. Many little expenses add up to one big debt.
Changing Your Attitudes to Money You will begin to understand why there is a need to change your attitude towards money as it can make your life a whole lot easier if managed correctly just as it can present you with ongoing stress if it is mishandled. The fact that you have created a problem of excess debt is due to having the wrong attitude towards money. By going through the process of preparing a budget and seeing exactly where your money has been going and how much waste there has been you will be able to change your ways and never get in a similar situation again. When you consider the things you might have been able to do with that 'lost' money you will begin to see that the alternatives are very often so much more appealing and the habit of frittering away funds will be able to be corrected. Often the amount that people waste on minor expenses, such as daily coffees and takeaway foods can represent a luxury holiday once a year and surely that would be much more appealing. Money is not something that can solve your emotional problems and spending money on luxury items that aren't necessities might give you some short term satisfaction but the long term stress and worry that excess debt brings with it is something that I am sure you will want to avoid ever having to deal with again. It is your choice to take charge of your finances and it is as simple as starting a budget and setting realistic short term and long term goals and then making those goals become a reality. Money can make you very happy and give you an excellent lifestyle if it is managed properly but even those who are earning huge incomes frequently fall into financial strife due to an inability to manage their finances. If you follow the proven steps to financial survival you will be better off than the majority of people and in the long term you will be able to afford more of the things that you desire than you would do otherwise. Your attitude towards money and debt has a huge bearing on the quality of your lifestyle.
Managing a Budget Deficit If your expenses are greater than your income then you have to contend with a budget deficit and there are only two ways you can deal with this. You can earn more money or you can spend less - it is as simple as that. Unfortunately it is easier said than done some of the time and that's why many people get into debt in the first place by topping up the deficit with money from credit cards and other high interest loans. Your budget will help you to focus on areas where you can cut your spending. Obviously you will be looking at luxury items first and those non-essential items that will be easy to eliminate. If you can eliminate your budget deficit by getting rid of these non-essential items then you are in luck however it might not be quite that easy for you to reduce your spending enough to make up the deficit. If that is the case then you will have to go back over your budget again and see the areas where you can cut your spending to try to close the gap between income and expenditure. If you are putting a percentage of your income aside a regular basis for some type of saving scheme then you might need to consider canceling that saving until you have managed to reduce your debt to such an extent that you are able to cover your costs with your income. Once all areas of cost-cutting have been exhausted you are left with the only other alternative of increasing your income and you will need to look at whether you're able to increase your hours of work or possibly even get a second job to bring in enough additional income to cover your expenses. One way or another unless this budget deficit is eliminated you will be destined to continue accumulating debt and the more you do that the more difficult it will be to bridge the gap.
Which Debts Need Paying First The debts that need paying first are the ones that will cause you the most grief if left unpaid. It goes without saying that taxes are at the top of the priority list as the IRS has more powers than anyone to recover the monies owed to them and failure to pay their account on time will not only result in interest but also penalties that can quickly mount up to more than the original debt. Medical debt is also high on the list of priorities and it is essential that you look after your health and that of the members of your family. Without good health you will need more money to pay for your health care and if you can't provide sufficient health care for yourself and those who are under your care then the long term problems that can come about from that are often much more costly than the original debt. Student loans and child care support are both top priority as they are debts where government departments get involved and they have wide reaching powers to recover monies owed to them to such an extent that they can actually make your debt reduction program more difficult to achieve. You should learn to prioritize all aspects of your life from the debts that you need to pay first to the tasks that you need to get done each day. Time management will help you through your daily tasks and financial management will ensure that you have the least problems possible with your creditors by paying those who must be paid first. Just because a debt collector starts putting pressure on you to pay a minor debt doesn't mean that other more important debts should wait for payment. Take control of the situation in all instances where possible and stay with the budget and the process that you have created for efficient debt control.
What to do with a Budget Surplus Where there is a budget surplus you should apply those funds towards clearing the debt that you are paying the highest rates of interest on. Where you have accounts that offer a discount for early payment you should also take advantage of those discounts by applying the budget surplus towards them. Until you have cleared your debt you shouldn't consider using the surplus for investing, as the money you will receive from the investment, less the tax that you will pay on that income, will be less than the amount you will save in interest payments for clearing debt. Always look for the most benefits for each dollar spent and in almost all cases there is no better benefit than clearing debt. Of course once you get to the stage where you have your finances in order and everything is under control budget surpluses can be better spent on investing in appreciating assets such as property, provided the property market is rising, and only where you will be able to make more money from borrowing to buy the property than you would using the money elsewhere. That is something you can look forward to once you have managed your debt and with your ability to budget well you will be able to calculate the ratio of income to expenditure and determine whether it is a good investment that you will be able to handle comfortably before you spend your money. You will be able to make all your decisions based on simple steps that will eliminate all the guesswork and ensure that you don't get into financial difficulty again. Sometimes you only need to change a few factors in your life to go from a budget deficit to a budget surplus and that is what you will be aiming to do as soon as possible. The more of the budget surplus you apply to debt the bigger the surplus will become and this affect begins to accelerate over time.
Slashing Your Spending The first step towards eliminating debt is to look at all areas of your spending and slash the items that aren't vitally necessary for your survival. You are in survival mode now so you need to think in that manner. Luxuries are off the menu until you are in a position to sleep peacefully at night and not fear the phone ringing thinking it is a debt collector on the line. Day to day spending of 'petty cash' adds up to a considerable amount over the course of a year and it could be enough to clear one of your outstanding high interest debts. Even buying one coffee a day can amount to quite a bit of money at the end of the year. Not only will that reduce part of your debt but you will also be saving interest that you would have been paying on that debt and the compound effect is more significant as time goes by. Making your own lunch and taking it to work rather than buying it from the shop can also save a lot of money and you might be doing your health a lot of good in the process by eating better food. Cooking your evening meals at home rather than going to takeaways or restaurants is one of the best ways to start slashing your spending. Maybe you spend a little too much on clothing and you really don't need to have the latest fashion item when other suitable clothing is still hanging in your closet unused. Are there any places that you could walk to rather than drive the car and save money in gas? There are so many small areas where it is quite easy to slash your spending without impacting on your lifestyle all that much and it is these little drains on your income that are happening on a regular basis that are responsible for a lot of the debt that you have to be concerned with today. This is the sort of money that you don't even notice going out of your pocket but you do notice the debt that accumulates because before you know it your creditors are knocking on your door asking for repayment. Prepare a shopping list before you go shopping for groceries and make sure you stick to that list rather than buying anything that catches your eye while you are in the supermarket. Supermarkets are designed specifically with the way the items are placed to make people buy and having a list of items you require before you enter the shop makes it a lot easier to manage the temptation that they put before you to buy. Write down every dollar that you spend for the week and then add that spending up to see just how much money you waste without realizing. Add this to your budget and then work towards slashing as many areas of spending as possible.
Making More Money Besides reducing your spending and making the most of the money that you earn the other way that you can reduce debt faster is to make more money. Whether you are self employed or work for a wage you should be looking at ways to work longer hours where possible to make more money. There are two opportunities to get ahead when doing this. Firstly the increased income can go directly towards reducing debt and by doing that you will be reducing the interest you will be paying on that debt and secondly there is the added benefit of the fact that you be either too busy or too tired to spend money elsewhere. Even if it is only for a short term the additional money that you will earn and can mark off against your debt can have a huge impact on the time that it will take you to reduce and eliminate your loans. You might be able to refinance some of your loans for a shorter term by being able to make bigger monthly payments. The additional money gives you more control to budget better and to make the most of discount opportunities and interest rebates for early repayments of loans. If you are already working long hours and can't possibly fit in an additional job or more hours at your current job them maybe it is time to start looking around for other employment that pays you more. There are always other opportunities and even a small increase in income might be all you need to get over the next hurdle. Ask for a pay rise and you might be pleasantly surprised to find that you get one. You need to think in a manner that you have to survive and you should take the courage to do all that you can to get through your financial turmoil. What is worse - The stress of debt or the fear of asking for a pay rise? You need to take action right now and you can change your future. The benefits are too great to let opportunities go by without seeing if they are available. When it comes to debt management there is no better time than right now to make proactive steps towards resolving your problems.
Handling Your Creditors What is the best way of handling your creditors? You will need to look at things from their point of view to understand the way that they will react to the fact that you haven't paid your account. They have given you a product or service that has cost them in time or money and all they expect in return is for their account to be paid. They are trying to run a business and for all that you know they might be faced with financial difficulties themselves where they are reliant on getting the accounts paid on time to cover their expenditure. So when you are faced with a situation where you can't pay your creditors you need to contact them as soon as possible to explain the situation and assure them that you will pay the account as soon as you can. You need to make them feel satisfied that they will be getting their money even though there will be a delay and that delay has only been caused because you simply have no alternative. This communication will reduce the chances of creditors taking legal action against you to recover the money. It will make them feel a lot more comfortable than for you to remain silent and not let them know what is going on and have one month dragged into the next when your account hasn't been paid and they become ever more frustrated at the fact that you are not responding to their requests for payment. Treat them as you would hope to be treated yourself if you were in a similar situation. Remain in contact with them on a regular basis even as you are paying off your old debt to keep assuring them that full and final payment will be coming. This will help to build some form of trust between you and your creditor and they will begin to understand that you are making a concerted effort to clear your account.
Consolidating Your Debt Consolidating your debt can help you to manage your debt more easily by helping to pay off many creditors at once with the use of another loan. While this is generally only a transfer of debt from one place to another you can often get better interest rates on these new loans, particularly if you get it through your bank as a personal loan or by using your home as equity and that in itself can save you money. By consolidating your debt at a lower interest rate you will be able to reduce your debt faster and in the process have the ability to pay off your high interest debts sooner. It might also give you the ability to take advantage of saving money by making your loan repayments earlier and sometimes you can get discounts for paying debt on time. Having one loan rather than a number of individual debts can make your budgeting a lot easier and can also reduce the number of debt collectors who could be calling at your door seeking payment of outstanding debts. If you do decide to consolidate your debt then calculate precisely how much you need, to cover the various debts that you want to clear, and use the new loan to pay off that debt immediately otherwise you might be tempted to use the money elsewhere and in doing so create even more debt. It might even be worthwhile having your new consolidated debt payable over a longer term to reduce your monthly payments and help you to focus on other more important or higher interest debts sooner. The whole idea of debt consolidation is to improve your financial position and you should be looking at ways that you can do this. You must make sure that the interest payable on your new consolidated debt is fixed at a rate that you can budget for as it is too risky getting a variable interest rate loan where the rates could rise and leave you in a more difficult position than you would have been had you not consolidated. If you are working with a credit counseling agency then discuss your intentions with them beforehand and get their expert advice on what the best solution for you will be.
Credit Counseling Credit counseling agencies can offer you a lot of help in reducing your debt. With the experience that they have they will be able to quickly sort out a budget for you and show you how to manage your budget, your income and your expenditure. Get recommendations from people within your area who have used specific credit counseling agencies and have been pleased with the results because there are many who don't deliver what they say. A good credit counseling agency will be able to review all aspects of your budget and set you realistic goals that you will be able to achieve. They will understand your requirements and help you to work around your problems while still maintaining a reasonable standard of living. They will review all your finances and make suggestions on whether or not you need to refinance, consolidate your loans, or anything else that needs immediate attention. If you find yourself a good credit counseling agency they will work with you over the long term tuning your budget to suit as your needs change and your debts decrease. They can also help you come to arrangements with your creditors and other lenders to help you pay off your debt and to ward off legal action for the recovery of outstanding money. Check their fees before employing them as there are many who charge excessive amounts that will get you into more debt than they can help you get out of. Some of these agencies are non-profit but don't assume that they are without checking their credentials and that can be done by getting a copy of an IRS approval of non-profit status. The genuine non-profit credit counseling agencies will be the cheapest but just because you won't be shelling out a lot of money doesn't mean you won't be getting the best of advice. Often these non-profit organizations have a better understanding of the difficulties that the ordinary person faces handling their finance. If you are to expect the best results then you will have to reveal everything you can about your income and expenditure, your debts and the problems that you have had with payment of your debts, and your credit history. It is only when they have the full picture that they will be able to make the best decisions to see you progressing towards your goal.
Managing Past Due Mortgage
Nothing damages your credit history more than a foreclosure so you will want to avoid it at all costs. Add to that the emotional strain of losing your most valuable asset and the time and effort that has gone into building your equity in your home and you can see why it is ranked as one of the most distressing events that can happen in a person's life. The information here is a general overview of the terms that apply to most mortgages. You will need to check the terms of your mortgage to ensure that the same terms apply to you. You will have 15 days after the due date for payment before you will be charged any penalties for late payment of your mortgage. After that you will be charged a late fee and the bank will generally contact you to find out when payment will be made. Once 30 days are up and you haven't made payment the bank will most certainly be in contact and need information as to why you haven't paid them. If you are still having difficulty making the payment then you should contact one of the government agencies such as the U.S Department of Housing and Urban Development to get some assistance to work with your lender to resolve your payment problems. Between 45 and 60 days the process moves to the next level where the lenders attorney will get involved and issue you with a notice of default which will detail the amount you need to pay to clear the arrears unless you have already contacted your lender to come to an arrangement for payment. After 60 days if nothing else has been worked out you will get a notice of acceleration which means the total amount of your loan and not just the past due amount is payable in full. You will also be told the date when your property will be sold to cover the mortgage if you can't pay it beforehand. This is the start of the foreclosure. You still have time to avoid the loss of your house at this stage however the longer things are left the harder it gets to retain ownership. Even after 3 months and before the house gets sold the lender will usually be happy to come to a suitable arrangement where you can clear the past due and get your payments current again. This also depends a lot on your past history and whether you have regularly missed payments. If you fear that you will be unable to make the necessary payments due then make sure you take action as soon as possible. Contact a bankruptcy attorney as this will halt the foreclosure and allow you some time to decide whether there are any alternatives that you can look into.
Automobile Debt
Along with credit cards automobile debt is one area that gets a lot of people in financial strife. Most people don't realize that one of the most profitable parts of the car dealership business is in the financing of the motor vehicles. There is often more money to be made from the financing than from the sale of the vehicle itself. And guess who pays for it? You do! And you pay considerably more for it than you would from many other types of borrowing. You are probably paying interest on not only the purchase of the vehicle but also the insurance, the warranty and any other additional items that the dealer talked you into at the point of sale. This makes for a very expensive vehicle and before many people know it they find themselves in difficulty making the monthly payments. So how do you get out of the situation? You need to consider what alternatives you have to reduce your automotive debt and that might mean selling your expensive motor vehicle and getting something a little more realistic considering the situation you are in. Cars are very often an emotional buy, where the impression that your new vehicle might have on friends, family and neighbors might influence your decision into buying a more expensive vehicle by borrowing more. You need to look at it a bit more realistically and consider what you have to deal with on a daily basis trying to make ends meet due to your car payments and then look for a better alternative. If you can manage with one car rather than two, then offload one and use the money from that to reduce debt. If you can get rid of your expensive vehicle that you have financed and have sufficient funds to pay cash outright for a lower grade vehicle, provided of course that it is reliable, then that would be a wise move and have a huge impact on your monthly budget. It could also be the fast track you need to get back into a better vehicle sooner without all the debt.
Keeping a Place to Live
It can be very frightening to get an eviction notice or to find that the bank is going to foreclose on your house mortgage. Having a roof over your head is one of the essential requirements that you expect to have for you and your family and to see that security disappearing due to your inability to pay your debts is one of the worst things you could imagine. No matter how well you get on with your landlord you have to understand that at the end of the day it is purely a business arrangement for him and money is all that really matters. It might be that the landlord is also working on a tight budget and needs your weekly payments to pay for his debts. The first thing to do is to pay the past due amount as soon as possible. If this is not possible then work through your budget and see how you can make payments to reduce the amount as soon as you can. Once you have some figures approach your landlord and discuss your situation fully and present your plan to eliminate the debt. The peace of mind that you give your landlord for doing this might be all that is needed to avoid an eviction. In some situations you might even be eligible to qualify for government assistance or you could possibly get help through a church group that you belong to. You need to start asking around to find out what all your options are and the sooner you do that the better. You might even be able to negotiate with your landlord for a reduced rate for a specific period of time to get back on your feet with the assurance that you will pay the deficit at a date that you both agree on. Failing that you might need to cancel your lease or sub lease the accommodation to someone else while you find cheaper residence elsewhere. Getting a roommate is another alternative that will help to share the expense. You need to do all you can to avoid eviction as quite apart from the inconvenience of the eviction you will find it more difficult to find new accommodation with reference to your eviction on your credit report. You might have to pay a larger than normal bond on any new rental accommodation due to your poor history.
Medical Bills As one of the leading forms of consumer bankruptcy medical debt is a major problem that many people had to contend with. Even if you have health insurance there are quite often additional expenses when medical care is needed that can amount to quite a large sum of money. Unfortunately for those people who are already having difficulty in paying excessive debt, they quite often have to stop paying medical insurance to cover their other financial needs. Without health coverage medical bills can build up to such an extent that there is never any likelihood of a person being able to afford to pay them. It is easy to see why so many people are made bankrupt due to their medical debt. Unfortunately the medical practitioners are getting tougher on having this debt paid and resort to all means available to them for the recovery of their money. This can mean you will be getting a visit from a debt collector to recover the funds or the medical practitioner might decide to sue you for the money in which case your assets can be seized and your bank accounts frozen. There are also becoming many more instances where people are refused medical attention simply because they haven't paid the past due debt and only cash upfront payments will see that they get the medical attention that is needed. This is even happening to people who have been having ongoing medical care by a practitioner and have been unable to pay the full amount of that care to date. Even care for serious health problems has been refused due to monies owing. Where possible you should always try to keep some form of health insurance cover and when needed ensure that they pay for everything that they should. Review the expenses that are charged to you and be sure that they are correct before paying as it is common for errors to be made that can be extremely costly particularly when you're already having difficulty making ends meet. There are some options available where you can get medical discounts and if so make the most of these and get all you can. These apply particularly to people on low income and those who don't have any form of health insurance. Consider getting Medicaid which is available in most states to help cover any future medical expenses and also help to pay medical bills up to three months old. Ask if you can set up an installment plan to pay off your past due medical bill to allow you to continue to receive medical care from your practitioner. Always look at all the options that you might consider available to maintain proper health care.
Child Support
Child support is a high priority debt that you must pay no matter how difficult your financial position might appear to be. There are a number of reasons why you need to make child support payments top priority. Quite apart from the fact that your children shouldn't have to suffer for your financial dilemma and the necessity for you to provide them with the necessary support to ensure their welfare is looked after, you also need to be aware of the consequences of not paying child support. Any child support court order that was written or modified after the 31st of December 1993 will automatically be deducted from your wages if you are employed. If you are self-employed or unemployed you are still legally required to make the necessary payments. Your failure to do so can result in various different actions being taken against you including debt collectors coming to retrieve the necessary funds, getting issued with a court order to recover the outstanding money or in some circumstances you can be put in jail until you make your past due child support payments. You can see now why Child support is a high priority debt that needs to be paid before many other debts. There are State Departments that have wide reaching powers to collect the past due money. If you can't pay this money then contact them as soon as possible and work out an arrangement where you can pay off the outstanding amount by installments and then include this into your budget and prioritize it accordingly. There are so many other areas that are affected by non-payment of child support that can impact on your ability to clear the rest of your debt including the sale of your assets to cover the cost and liens on your assets to stop you borrowing against them to clear debt. Once your past due amount exceeds $1000 the debt will be reported to the credit reporting agencies and anyone who accesses your credit reports such as creditors, insurance companies, landlords and so on will see that you have fallen behind in your payments and this certainly doesn't help your cause when trying to sort out your debt problems. Make it your priority and make your life easier in the process.
Paying Overdue Taxes
It is top priority to pay all your overdue taxes as soon as possible due to the compounding problems that occur. With penalties and interest on overdue taxes it doesn't take long for the total to mount up where you will be paying more for those than the original amount outstanding. Federal taxes are one of your most important debts to clear as there is no one quite as ruthless at recovering debt than the IRS. They have more powers than anyone else to recover debt. They can take assets to cover the debt and that even includes your home so you don't want to be messing with the IRS. If you know that you won't be able to pay your tax when it falls due then you will need to look at all alternatives and that might even include the necessity to use your credit card to pay your account simply because that will be an easier debt to manage than the IRS and the interest and penalties that they will impose. If you have enough equity in your home then that is another solution because the interest you will pay on your home mortgage will be a lot less that the IRS interest for late payments. You will probably be reluctant to use your house to borrow the money, and rightly so, however in the case of federal taxes you could stand to lose your house if you didn't pay anyway. If you have already incurred penalties and interest for outstanding taxes then it is possible to come to an arrangement with the IRS where they will reduce some of these charges provided you can offer them some reasonable explanation as to why this happened. An example of this would be an illness that stopped you from working and earning enough money to make payments. Often you can arrange a payment plan with the IRS to pay off your debt and if they agree to that use your budget to work out how much you can reasonably afford to pay without getting in difficulty and defaulting. Once you get a payment plan sorted you won't want to miss any payments under any circumstances. #BREAK# #TITLE#Student Loan Debt#/TITLE# The percentage of people who are getting behind and defaulting on the repayments of their student loans has been steadily increasing over recent years. It can be very difficult when you finally graduate and find that you owe thousands of dollars in student loan debt and the job that you have isn't paying quite enough to cover all your living expenses and the payments required on your loan. Many students get into difficulty paying back their loans and they begin their working career with bad credit due to defaulting on their loan. You don't want this to happen and you will need to factor into your budget the repayments of the loan. While payment is due once you graduate or stop with your education there is often a grace period of 6 to 9 months after that date, depending on the type of loan that you have. The first thing you will need to do if you are having problems paying is to determine what type of loan you have and what options are available to you. This grace period will give you time to find a job to help make the payments. With some loans you will begin to make interest payments immediately whereas others will allow you to pay the interest over the term of the repayments or at the end of the repayment of the actual loan. This is why it is important for you to find out what type of loan you have and what options are available to you to help with your financial planning and make sure that you don't default on the loan repayments. If you do default on the loan there are various consequences that you need to be aware of. The full amount of the debt could be called up for repayment in total or it could be turned over to a debt collection agency. You could incur additional late fees and collection fees and your credit history will be damaged. There are many more areas that will impact on your life so it is wise to work through any issue with your lending advisor and do so with the assistance of the budget that you will have already prepared. They might be able to arrange a consolidation of debt that you help you pay off your loans at a lower interest rate thereby reducing your overall payments that need to be made each month.
Improving Your Credit Rating
Once you have paid back your outstanding debts you can concentrate on rebuilding your credit rating. Although you can't do anything about the bad history that you have and the fact that previous debt problems will show on your credit report for 7 ? years you can start to rebuild your credit and eventually have more positive information on your credit report than negative. You will do this by applying for small amounts of credit and paying them off on time all the time to start building a good credit record. You should only start doing this once you have sorted out all your debt problems and are in a financially stable position where you know that you will be able to make all your payments on time. If there were specific reasons why you got in debt in the first place that haven't been completely resolved then it would not be wise to get this additional credit until you have that part of your life sorted. You will only get more credit after you have created an updated budget that will allow for the repayments and show that you will be able to manage the new debt repayments without undue stress. Lending institutions will look at the positive results you have had with your credit in more recent times and this will make it easier for you to deal with them in the future. While you will be wary of getting credit cards again, and rightly so, they can be useful for rebuilding your credit. To do this you will get a card that has a relatively low interest rate and a small credit limit and you can use it to buy essential items only. You will need to pay back the full amount at the end of the month so you don't start building debt again. If you purchase and pay back within the month you won't be incurring interest charges but you will be building a better credit rating. Later you can make some bigger purchases on essential items once again and then pay them off over a period of time making sure that you always pay the minimum amount required, or better still more than the required monthly payment. After you have had your credit card operating successfully for some time and paid it off you can apply for personal loans and build your credit by paying them back in full, on time, all the time. Eventually people will be more interested in your recent good credit history and they will not focus on the problems that you had in the past.
Once You Have Control of Your Debt
It is a great feeling to get on top of your debt and know that you are able to make all your payments each month and not have to worry about debt collectors or paying for your groceries but now is not the time to stop doing the things that have helped turn your life around. You will have become accustomed to using a budget to get your life in order and take control of your money and this budgeting should continue so you can move to the next level where you have additional money that can be used for investment and adding security to your life as you age. You will probably have a different outlook on life where you understand the difference between wants and needs and as you will have experienced the lows of constant financial stress you will not want to go back there in a hurry. So continuing along the proven path to financial security of reducing debt and managing the daily flow of your cash will give you a lot more freedom to build wealth now rather than focusing all your energy on reducing debt. It is a more positive phase in your life and you will see how much the debt encroached on your lifestyle and freedom. You should have adopted an attitude whereby you will only ever spend less money than you earn and where you will never buy luxury or non essential items if you have to go into debt to get them. You will only consider debt if it is to buy an appreciating asset that will deliver you more return for your money than the amount you are paying in interest. This new attitude will also include better time management skills and that in turn will give you more time to do the things that you like. While those times of excessive debt are extremely hard to handle the process of reversing your monetary situation is an education that will set you up for better things in the future.
Ignoring Your Debts
Ignoring your debts won't make them go away. As much as you would like to think of something else you cannot address the situation without facing it. If you put your head in the sand then someone is going to come along sooner rather than later and give you a big kick in the butt and it's going to hurt because you won't see it coming. That kick will come from a creditor who you haven't contacted to work out an arrangement for payment of an outstanding debt or possibly even the bank with a notification of a pending foreclosure on your house. You might find yourself getting a notice of eviction simply because you didn't contact your landlord to make a payment arrangement while you get your finances sorted. You need to face the facts that you have a problem and then set yourself goals to resolving the problem. Problems that are left usually present themselves as bigger problems a short way down the line so today is the day that you need to start looking at your debts. Taking action now can result in savings of interest and late payment fees. People who have money generally pay less than those who don't because they are able to pay debt on time and don't have to fund the additional expense of late payments in one form or another. There is one thing that is certain and that is the fact that people who owe money might forget what they owe but those who are owed always know how much is due, so you might prefer to forget but your creditors won't. Also - more often than not a creditor will adopt a far more positive attitude towards you if you explain the situation you are in and let them know that you are currently working towards full and final payment of the debt as soon as possible. Communication can do wonders for your debt reduction program.
Missing Your Car Payments
Missing your car payments can create all sorts of problems in many different areas. As most of us rely on a car to get us to work it is essential to make sure you have enough money set aside to make the payments and if your budget shows that this is placing too much of a strain on your finances then you might need to downgrade to something more affordable. Finance companies are legally entitled to repossess your car without getting a court order if you miss your payments and they can do so without warning. When this happens the repossession will be noted on your credit records and will remain there for the next seven and a half years so this is one area of your spending where you will need to make the appropriate decisions in advance of anything happening. Once your car has been repossessed the finance company will generally advertise it for auction to help recover the outstanding amount of the loan. Unfortunately for you the problem of debt doesn't stop there. If the vehicle is sold for less than the amount still owing on it, plus the costs involved in repossession and selling the vehicle, then you will be liable to repay that deficit to the finance company. So you will have lost the use of your car which will impact on your ability to get to work and earn a living and you are still lumbered with the debt that will need to be repaid to the finance company. If you are struggling to make the payments it is better to contact the finance company in advance of any action to see whether you can refinance the vehicle over a longer period where the repayments will be a little less and more manageable. They might also give you the opportunity to pay off any outstanding debt by coming to a suitable arrangement. This could give you enough time to sell the vehicle paying off the loan and finding something that is more suitable for your current financial position. #BREAK# #TITLE#Trying to Get by Without a Budget#/TITLE# Don't even try to get by without a budget as you will be setting yourself up for failure. It's as simple as that. Without a budget you can't hope to have control over your finances as most people will find that once they start doing a budget they realize all the additional expenditure they have in their life that they hadn't noticed in the past. It is the little bits and pieces of expenditure that accumulate into a bigger debt problem. Creating a budget is one of the first things that you should do and using that budget daily will keep you on track to getting out of debt. If someone were to ask you right now to write down exactly how much it costs you to live day to day, week to week, and month to month -- could you do it? If you are honest you would probably have to admit that it would take quite some time as you would have to look through your card statements, monthly bills, shopping lists and more to get a clear picture of what money you are spending. In addition to that you would need to look at any expenses that occur at irregular intervals either quarterly or once yearly. You would also need to make allowances for additional spending during the festive season and the extra interest you would need to pay on the credit card debt that you would drum up over that period. On top of that you would need to make allowances for maintenance on your vehicles and household maintenance. The more you look into the expenditure the more that will be revealed and that is why a budget is so important. Most people get a big shock when they prepare a budget for the first time as they never realize how much money they spend on things that they don't think about. And that is why you must have a budget. There is no suitable alternative. You can't run a business at its best without a budget and you can't run a household without one either. #BREAK# #TITLE#Credits Cards#/TITLE# No doubt if you have got financial problems then you have already got credit cards that are probably maxed out to the limit and costing you big bucks in interest each month. Credit cards have got more people into financial difficulty than anything else and the banks are only too willing to give out more cards and increase credit limits encouraging people to spend more and more money. So what can you do about your credit cards? Well if you are managing to make minimum payments each month the first step is to cut them up and not use them any more because that puts a hold on that source of spending and immediately brings into effect some control over your finances. You should certainly stop using your credit cards but you might need to keep them intact in the interim if you have debt where you are paying even higher interest rates than the cards, to allow you to juggle your money around so you're paying off your high interest debts first. You might be in a situation where your credit cards don't have the highest interest rates of all your debts so rather than paying them off target the other debt before your credit cards. You should look at consolidating your debts and paying off your credit cards with one loan of a lower interest rate. This will not only stop you from buying things on the card but the savings on interest can go towards debt reduction. Credit cards make it all too easy for people with bad habits to slip up and fall back on those bad habits by buying things that they think they need just because they want them. Don't fall into that trap and if you feel that you might then make sure the cards are rendered useless so you can't use them. Consider how good your life would be now if you had no credit card debt and no need to pay installments each and every month. Surely that's enough to make you want to cut them up right now and never use them again. Borrowing Against Your House
There are pro's and con's for borrowing against your home and they all need to be taken into consideration before you proceed with any additional borrowing. On the one hand the money you can borrow on your home will be of a lower interest rate than most other forms of loans and this can help you to reduce your monthly repayments by using the house money for clearing more expensive debt. With the ability to spread the term of repayment over a much longer period you can generally make quite an impact on reducing your monthly outgoings. Use your budget to determine how much you are paying on all your outstanding debt and then calculate what the payments would be if they were all consolidated under the one loan against your house. This will show whether that is the best decision to make to help you manage your finances more easily. Where house prices are rising, you will have increasing equity in the home that will allow you to borrow more against it since the time you originally arranged your mortgage. The downside of borrowing against your home is where you are already struggling to make your home mortgage payments and by borrowing more you will be putting your house on the line and risk losing it. You certainly don't want the banks to foreclose on your loan and if that looks eminent then it would be unwise to increase your borrowings. If you calculate that you will not be able to make the additional mortgage payments then it is better to sell off other items that you have borrowed against to red
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