Successfully dealing with individual debt
Financial crisis can bring about about a major shift that affects economies and individuals household purchasing power. With less or no money at hand, you are faced with the inevitable situation of borrowing to cater for your needs. The moment you take money from a source, you owe that institution or individual. What you owe is there for termed as debt. Debt can be a form of credit because it was given when the individual did not have the means to make a purchase or pay for a service at a particular time.
Debt in itself is not entirely bad, it is when it’s not paid that it takes a bad turn. Debts actually help you out when you are in a tight spot. In dealing with debts it will come to a time when you would have to reduce your spending to enable you pay for what was borrowed. Its not advised to pile up debts other than that you may end up with bankruptcy which can mar your credit report for close to 10 years.
Debt is just a reminder of the inability to manage or create enough alternative finance for your needs. It does not mean the end of the world or the end of your finances but it must be managed well so that it does not become a persisting problem. When you are able to do this successfully, you will gain valuable financial skills which will help you in the near future. Debt is not a scary event or situation because owing money is part of daily life. You will just have to make a clear roadmap on how to you plant to pay back the debt. It is well understood that sometimes life can be tight and making ends meet ends up being quite impossible. In times like these, the most appropriate response to is to go in for financial assistance from either a financial institution or friends and families or societies that you belong to. This makes you liable to pay back what you have borrowed from them.
There are several ways to deal with the debt that has been incurred. Debt consolidation is available as an option. It simply means putting together scattered debt into one lump sum. This is done especially when you have subscribed to a lot of credit cards. You make your debt into one manageable lump sum amount. You therefore repay all your loans at once, instead of having several loans to pay. You can consolidate your debt on your own or seek help from the banks by getting a loan from a debt consolidation company. Having one debt to pay, makes it easier to take care of. Additionally, you get extra perks of getting lower interest rates especially on credit cards which have high interests. The ability to secure the low interest rate on your loans make it easier to handle.
Another way is to reduce your spending and increase your savings. If you want to deal with debt the fastest way, one of the actions to clear your debt is to ensure that you are making some savings. This savings can come out of whichever income source you have. Its better to identify the points at which you can save either on your mortgage, other utility bills or taxes that you have to pay. A good structure on your income will always ensure that you have extra money left to settle your debts. Increasing activities that will bring more income and help you to save is important. Car boot sales of some of your household items, foe example, will also bring in more savings or surplus to enable you pay your debts. If this is adhered to, you will be able to deal with your debts.
The third way you can deal with debt is to create a monthly bill payment calendar. How cool can this get? It’s an awesome way of keeping track of what you owe. You will only have to mark out the days on which your pay check comes in (you get income) and the dates you can effectively make payments to clear your debt. Going by the calendar will ensure that you have a structured means of handling your debt.
Make a decision on which debt to pay first. This is also another very important strategy when it comes to dealing with debt. Credit cards and mortgages ,for instance, have high interest rates for its users. Due to this it will be appropriate to rank which ones have the high interest rate and deal with them accordingly before coming to those with lower interest rate. Apart from that you can also choose the debt which has the lowest balance, to tackle first. It all depends on how you want to manage your debt and be debt – free as soon as possible.
Additionally, you can also deal with debt by paying bills on time every month. When you come in behind on your payments, there are usually fees for that. That does not make the situation too good because it can potentially increase the amount you owe. An alarm can be set for the scheduled monthly payments to remind you of the due dates / days you have to make payments. Keeping faithfully to your monthly payments, you will see your debt gradually decreasing. Its best to send in your payments as soon as you receive income. With time the debt will be fully paid off.
Use a monthly budget for planning expenses. A budget refers to a financial plan for a defined period of time – usually a month or a year. It enables you put on paper how best you plan to attend to the debt you have. This will enable you to know exactly how much you have at your disposal to cater for what you owe. Budgeting ensures that you are also aware of any extra money that you will get to cater for other expenses that you have.
If you realize that you’re nearing the red zone with your debts, you can seek help from credit counselling agencies. Debt consolidation and debt settlement companies are also available to assist you in managing your debt successfully. Having debt is not a life sentence, it’s possible to come out of it.