Drowning in Debt? 5 Financial Steps to Take Today
Friday, February 1, 2019, 6:00 AM | Leave Comment
Debt can accumulate to a point that it exacts strains on your finances, emotional state and even relationships.
Problems with debt often signal a need for prompt action and serious evaluation of your habits and priorities.
Here are five ways you can quickly address mounting debt.
-
Stop the Spending
By trimming expenses or resisting the urge to spend, you can release yourself from the need or urge for credit cards.
For example:
-
Eliminate cable or satellite, or limit yourself to the basic packages
-
Eat more at home, where you can avoid expensive drinks and the need to leave tips
-
Avoid “discounts” for opening department store credit cards. These entice imprudent spending and carry interest rates that erode the savings from the “sales” price
-
Lower grocery bills with store label goods rather than national brands
-
Trim gas purchases with public transportation, carpooling or combining multiple errands into one trip
-
-
Debt Consolidation
Debt often lingers and accumulates because of the interest payments. Consider a low-interest debt consolidation loan or a home equity loan to pay off higher credit cards and loans. With either approach, pay attention to transfer or other fees.
Also, a home equity loan converts previously unsecured debt into obligations secured by your home. If you fall behind on a home equity loan, the lender can foreclose and take your residence. The lender’s security interest in your home is the trade-off for the lower interest rates of a home equity loan.
-
Debt Settlement or Management
In a debt settlement or management plan, a company or agency negotiates a reduced amount or a payment plan with all of your creditors. You typically set aside a portion of your pay or other income each month to the company or agency. In a debt settlement program, those funds remain in a savings account until enough accumulates to pay to the creditors.
The counseling agency or company will first review your finances to determine if you can realistically complete the program. Failure arises often because participants do not save enough or regularly to fund the plans. With debt settlement in particular, your creditors are not required to accept settlements and may insist on payment in full. You also need to check reviews or other sources to determine if the company or agency is reputable.
-
More Income
Devote extra money to your credit cards and other loans, especially those with the highest balances and interest accumulations. You can derive more income from wage or salary raises, bonuses, selling unnecessary or unused items and even lottery winnings.
Additional employment or freelance opportunities may infuse extra cash into your budget to accelerate the pay down of debt. Be careful to spot freelance scams, often characterized by promises of high pay for little work or upfront fees to begin the work.
-
Bankruptcy
In bankruptcy, you petition for a discharge of your debts and secure a “fresh start.” Most consumers can file for either Chapter 7 (liquidation) or Chapter 13 (wage earners). A bankruptcy “means test” determines if you make enough money so as to be placed into a Chapter 13 plan so that your unsecured creditors get a portion of what they are owed.
Bankruptcy does not discharge all debts. Among these include:
-
Alimony or child support
-
Debts that arise from fraud or activities such as theft or embezzlement
-
Secured debts, such as a vehicle loan or mortgage (at least up to the value of the car or real property)
Be sure to speak with a bankruptcy attorney before deciding on any path. They can help you understand all your options and the consequences of each choice.
-
You have remedies for mounting debt. Finding the solution starts with an honest assessment of your financial situation and which alternatives prove realistic.
Ultimately, emerging from debt today means promptly finding, developing and executing a workable plan and change in lifestyle habits.
Throw us a like at Facebook.com/doable.finance
