Debt Management Guidelines: How to Get Your Debts in Order and When to Get Help

Most families have a little bit of debt they have to deal with. Unfortunately, it’s not uncommon to lose control over finances. If you find yourself in any kind of financial trouble, it’s time to develop a debt management strategy. How can you pay your debts back? How should you prioritize them? Should you consider consolidation? Or even bankruptcy?

Here are a few tips for establishing better debt management:

• Make a list of all of your debts and how much you owe each. Organization is essential. On the list, information should include total amount of debt, the name of the creditor, minimum monthly payment, and due date. Having it all listed right in front of you allows you to see the bigger picture.

• Prioritize your debts. Obviously, things like home loans, child support, auto loans, and IRS back payments should come first, since these types of debts hold the biggest consequences should you be unable to pay. As for credit cards, pay the ones with the highest interest rate first since that rate will keep getting higher and higher if you get behind.

• Once you have your debts prioritized, make any necessary sacrifices in order to pay at least the minimum amount. While only paying on the minimum won’t reduce the debt very much, if at all, it will still prevent it from going up any.

More Tips for Debt Management

• Try to save money as much as you can. Do you really need to go out for lunch every day? Do you really have to take the car to a place that is within walking distance? Are there any entertainment expenses you can cut, like a Hulu or Netflix subscription? Do you really need all of the channels on your TV? Even if you only cancel entertainments for a couple of months, it can really help you catch up on debts.

• Recognize signs that you need help. Debt management isn’t always something one can do all on their own. There are management and consolidation companies that will help you keep your finances in order. There is also bankruptcy to consider if things really get out of hand. If you simply find that you have too many debts and too little money to meet the monthly payments, it’s time to seek professional assistance.

Paying Off Debt By The Numbers

The Numbers. According to statistics, nearly 80 percent of adults in the United States carry some kind of consumer debt. Owing money seems to have become a way of life, though a surprising 70 percent of those in debt consider their debt load to be undesirable. The question begs to be asked, “why do people put themselves in such a situation to be in debt when they don’t want to be?”

The answer to the question isn’t simple and clear-cut. In some cases it may involve personal spending habits while in other cases it might relate to an unforeseen set of circumstances. Either way, debt can cause unhealthy stress, and people can sometimes be quick to judge. Neither being stressed nor being judged is particularly helpful and can lead to depression, feelings of failure and strained relationships among other negativity. So perhaps a better question to ask is, “what can someone in debt do to change their circumstances and dig their way out?”

A Pull in Different Directions. Sort of like raising kids, there’s no single “right” way to do it, yet everyone seems to have an opinion on the topic. As a consumer searching for answers, it becomes very easy to get sucked into one camp or another with regards to which regimen to follow. There is no shortage of financial experts, books and methodologies targeting people who need a little financial wisdom. The problem is, many of the pre-packaged debt payoff programs treat the journey to debt freedom as a cult-like religious following rather than a progression towards financial literacy and financial independence.

Rather than adopting a “one-size-fits-all” (one-size-fits-none) approach, it’s important to consider debt, income, expenses, and financial goals in context with the individual’s household, habits, and goals. There are two parts to the debt payoff equation: the math, and the individual’s lifestyle. To be effective, any get-out-of-debt solution needs to address both.

The Method. The math is the easy part. Math is sterile. Math is cold, matter-of-fact. It’s not influenced or affected by opinions or emotion. It’s predictable, with no surprises. Unfortunately, though, it’s also very misunderstood or perhaps intimidating to people who aren’t math-savvy or analytical.

The lifestyle part is what’s difficult. Anyone who has ever made a New Year’s resolution (and failed) knows exactly what that means. People have the best of intentions to improve their plight in life, but along with temptation and the emotional ups & downs of triumphs and setbacks, people’s “wants” frequently win out over their “needs”.

Between the two, it’s essential to find a workable balance. Here’s the meat and potatoes of a good, solid, and livable plan to get out of debt and start making progress towards healthy finances:

Brainstorm and Scale Quantities. People are rarely successful if they make drastic changes or quit habits, cold turkey. Little changes cumulatively make big differences. Order the medium instead of the large. Turn back the thermostat two degrees in the winter or up in the summer. Figure out what’s not being used, like land line phones or premium TV channels and scale back. Then figure out the monthly savings, and rather than spend it elsewhere, apply it to debts.

Create a Budget. Creating a budget is more than placing planned numbers in rows and columns and then trying to live by them. Budgeting effectively involves brainstorming ways to cut back on costs without cutting back on quality of life. It’s an example of finding the balance between the math and the lifestyle. By applying the savings from brainstorming and scaling quantities down to debt payoff, the household budget allows progress in becoming debt-free without drastic changes to lifestyle.

Redirect Cash Flow. Rather than direct depositing paychecks into a zero percent interest checking account, perhaps open a high yield online savings account at 2% to 3% interest. Let the money accrue interest in the account and then move money in batches once or twice per month for bill payments. The end result, simply by rechanneling the direction of cash flow, will add substantial resources to pay down debts without any effort at all.

Some simple habit changes can make paying off debts seamless and easy without having to live on beans and rice for every meal. In most cases, minor changes that require little to no sacrifice will produce the benefit of shaving years and potentially thousands of dollars in interest off of consumer debts.

As a general rule, people embrace habits that don’t deprive them of what they want. So a math/lifestyle balance is the key to sticking to a debt payoff plan rather than systems that rely on raw willpower or require self-deprivation. Taking the time to improve financial literacy can make it possible to “have your cake and eat it, too.”

Options for Credit Card Debt Relief: Info on Services Available for Those With Credit Card Debts

For many people, debt is a way of life. Don’t allow yourself to feel discouraged if you have to search for options for credit card debt relief – you are not alone. There are millions of others out there in the same situation. It usually starts with someone getting behind on a couple of payments and before they know it, the interest rates and late fees are blown out of control.

There are options for relief. There is no need to sit around biting your nails all day wondering if you are about to get sued, or when / if you should start filing for bankruptcy. The good thing about credit card debts is that they are easier to deal with than tax debt problems and child support back payments.

If you are already falling delinquent, your credit score is probably already being negatively affected. It will take some time to get everything back on track and recover. What you can do is start doing damage control, whether by freeing up more money each month with an arbitration program or paying everything back with a consolidation loan.

It might be worthwhile to get credit counseling. Most of the companies involved in the debt-relief industry offer some sort of counseling service. A certified counselor can help you create a more affordable budget and learn how to live within the new means. The counselor will also offer advice on what best suits your situation, increasing your financial literacy.

Some credit repair / relief companies even offer FREE consultation to help you get started. You might just be required to fill out a quick survey about your situation and provide details about how much money you owe.

How to Choose from Options for Credit Card Debt Relief

Don’t just choose any old company. Choose a counseling service that will help you understand all of your options for credit card debt relief. One such option might be a “hardship program”, which will involve your interest rates going down temporarily in order to provide you with a chance to catch up. If you choose a company that has experienced negotiators, you might be given the opportunity to have the amount of debt reduced. If you have the right people working on your behalf, the lender may forgive 20% or more of your debt. However, you’ll be required to pay the rest of it off immediately.

Unfortunately, there are no guarantees. Avoid any credit card relief company that makes any promises. There is never a 100% guarantee that a creditor will agree to anything. Even if they do, it probably won’t be an instant fix. You’re looking at a time frame of 3 – 5 years to get everything straightened out.