5 Steps How To Deal With Debt
Sat Aug 29, 2009, 8:38 am | Leave Comment
Debt is humongous problems for many folks. Sometimes they just can’t afford to pay more than the minimum. So the debt keeps piling up month after month. Personal debt can become a nightmare. There is huge cost to it not only financial but emotional as well. But the sooner you face the problem, the sooner you can get back to even.
I read a book “A Survival Guide to Debt: How to Overcome Tough Times & Restore Your Financial Health
Understand your income, spending, and debt
The average American’s personal saving is 4%-5% so far this year. Make an honest effort and put that much of your income away as saving. And then pay for your expenses.
Allen says it’s often small expenditures – eating out, your morning coffee – that make the difference for people on the edge. Spending $10 a day on lunch can add up to more than $400 a month for a household if two people are eating out. If you are living paycheck to paycheck, it’s enough to push you over a financial cliff. See what you can cut.
Manage your debt the right way
If you can’t deal with debt just by tightening your belt, do the following:
- Get credit counseling ASAP
Nonprofit debt management companies are popular options for creating a plan to repay debts and halt harassment from creditors. Allen recommends Money Management International, a Houston-based firm that’s the nation’s largest nonprofit counseling service. He says other reputable counselors can be found through the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA). - Debt settlement companies
They are an option, but take extra precaution when you talk to them. Debt settlement companies are a controversial tool for deeply troubled borrowers, especially those with hefty credit card debt. These for-profit firms agree, for often hefty fees, to try to negotiate a lower debt balance with your creditors. - Home equity loans
Allen says don’t do it. Taking a loan out against the value of your home was a popular option during the housing boom. But using home equity to pay off credit cards, for example, isn’t the safest way back to fiscal health.
Talk to creditors
Before you go to someone else to help manage your debt, remember that there are steps you can take by yourself to get control of the situation. The first step is opening up communication with your creditors and then go from there.
Bankruptcy should be your last option
If you are really and wholly drowning in debt, bankruptcy may be the only option. If it’s clear that paying back debt will be almost impossible, the first step, Allen says, is to get some legal help.
No matter what happens, stay cool and stay positive
You must deal with the emotional component that I mentioned earlier in a positive way. Dealing with debt is never easy, and the stress can affect your family, your work, and your mental health. Get emotional help from family, friends, your pastor.
In a Nutshell
Allen says, it’s best to keep financial strain as separate as possible from the rest of your life. “People need to realize they are not their debt. They need to separate their net worth from their self worth,” he says. “People don’t realize they have options, and stress because of their debt is really ruining their lives.”
What do you think?
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