If you have debts – large or small – and you are having difficulty managing them, there are some steps that you can take to start managing your debt and to get your debts under control so you can start on the path to debt free living.
If debt is weighing you down then you need to take some action.
The worst thing you can do is ignore the issue because sooner or later it will come back to haunt you
Your aim is to be managing debt from a position of strength and knowledge, rather than being on the back foot and dreading the next phonecall or knock on the door
And by taking positive actions you are not only on the first steps to getting your debt under control, you are also taking the first step to ensure that the situation you are in never arises again
7 Tips for Managing Debt
So here are a few tips on managing debt and how you can start facing and dealing with your debts head on
1. Stop using credit cards.
One of the leading factors in the current economic crisis is people buying things on credit they cannot afford. The next thing they know, they find themselves unable to do anything more than make minimum monthly payments and that is a trap which you really don’t want to get into.
- Minimum payments will keep you in debt because every month interest continues to accrue on your original balance. A $1,000 balance on a typical credit card can take 22 years to pay off if you make only the minimum monthly payments!
- Don’t fall into the trap of credit card debt. Instead, avoid the hassle and expense by paying cash or debit card for the things you buy. If you want a big-ticket item, save the cash before you make the purchase. Only buy when you can afford to pay for the item in full before you bring it home
- If you are living off credit cards then you need to take some steps to reduce your outgoings or increase your incomings (or both) so that you start to bring in more than goes out monthly
2. Create a realistic budget that includes debt repayment.
The first step in gaining control over your debt is creating a workable budget. Rather than stifling you, a budget can bring you freedom! You’ll know where your money goes and you’ll set a spending plan so you can continue buying the most important things in your life.
* Your budget should take into consideration all facets of your lifestyle, including housing, food and household items, utilities, savings, recreation and debt repayment.
* If your budget doesn’t include room for debt repayment, there will never be enough money to pay off your debt. Take control of your financial reality by working with a realistic budget every month. Before long, you’ll see your debt diminishing while your savings grow.
3. Seek the help of an independent financial advisor
The best way to be sure you’re making sound financial decisions is to seek out the help of a financial professional.
* Credit counselors, financial planners and accountants are experts in the areas of savings, debt repayment, investments and tax deductions. Implement each of these areas into your finances to eliminate financial strain and secure a stable financial future.
* Your bank would actually be a very good place to start
* Make sure that (as far as you can) that the financial expert you are seeing is independent as possible and doesn’t have a vested interest in selling you a consolidation loan. Such loans can be a sound financial decision but in many cases there are other better solutions available to you. You need somebody independent
4. Talk to your lenders
Many people assume they have no choice but to accept the interest and finance rates offered by their banks and credit card companies, but that isn’t always the case!
* Talk to the people at your financial institutions. You may be surprised at how willing they are to negotiate
* If your credit is in good shape or you’ve made steady, progressive strides to improve it, you may be able to get lower interest rates on your debts.
* You might also receive higher interest rates on your savings, giving you a double shot at eliminating your debt entirely and moving forward with your finances in a positive direction.
Communication is really important – so even if you see no way out of your situation, talk to your lenders, there is a very good chance they will be able to help you
5. Actively manage your debt
Don’t wait for a solution to present itself to you – go out and define a solution of your own and present it to your lenders.
This is all about being proactive with your debt, finding a solution which works for you (and if necessary your lenders) and presenting it in the right way
Get organised, do your paperwork, pay your bills on time, communicate with people you need to communicate with
Treat your money management (not just your debt management) as a part time job
Try and find an hour a week to concentrate on money management
I promise you it will be worth it and you’ll then start managing your money properly
6. Find ways to save money
Saving money is a whole new topic and there are many money savings articles on this website which will point you in the right direction
Look initially for monthly savings you can make so that you gain the benefit of those savings month by month such that savings you make can help you manage debt by either helping to cut out the credit cards or allow you to allocate more money to your debt
Here are my top 10 things you can directly look at to save money
- Look at what you spend in the supermarket and find ways to reduce your weekly/monthly grocery bill
- Look at what you spend on takeaways and “going out” and look to reduce it
- Look at your insurance costs and see if you can find a better deal
- Same for utility bills such as gas, electricity, water
- Can you reduce your car running costs by walking, reducing your journeys (even in some cases buying a more efficient car)?
- Cable/satellite TV – do you really need all those sports channels?
- Gym memberships – could you get away with going for a run instead?
- Lunch at work – could you take sandwiches?
7. Find ways to earn more money
You should also be actively looking at ways to earn more money – there are tons of money making ideas here and I add more regularly but here’s a few to keep you going
- Can you do overtime in your current job?
- What about that promotion you have been talking about for a while – take some actions to secure it
- If you have teenagers encourage them to take a part time job and take some of the pressure off yourself for buying them clothes etc
- Take a second job – supermarket work, bar work, waiting on in the evenings and weekends
- Sell your stuff on eBay or start an eBay business
- Start a blog (like this one) and monetize it with adverts
- Create your own product and sell it online
- Freelance for a while using your skills – writing, coaching, graphic design are top freelancing opportunities
You can repair your debt problems and learn to avoid creating them in the future. These five steps will point you in the right direction and get you started on a new path to financial freedom and prosperity!