We all know how overwhelming debt can be- the continuing parade of bill collectors, debt collectors and even legal action being taken can be extremely stressful - debt can kill you! The stress of being in debt has been proven to raise blood pressure, cause heart disease, and even cause panic attacks or heart attacks! So what do you do, when you're so far into debt that you can't deal with it, but you want to get out of debt? Manage your debt, so it doesn't manage you!
There are several excellent programs out there, under the names of well -known credit - counseling agencies - you can take budgeting and personal finance classes at any vocational school or community college. Most banks even offer budgeting and finance help. But debt management isn't as simple as just learning how to budget or about stopping the debt collectors' phone calls.
Have good debt management
To have good debt management, it's important to get out of debt and STAY out of debt. This can be extremely difficult for your average working -class person/family who lives paycheck to paycheck. The allure of easy credit, to have a "higher standard" of living, or more/better "stuff," can be hard to fight. The problem is, easy credit is is the quickest way to debt that there is.
If you're in debt over your eyeballs, start with the basics. Sit down, write out a list of all of your creditors and amounts owed. Don't ignore even "small" debts, these add up quickly! Then, compare your debt to your yearly income. If your debt is double or more what your yearly salary is, you're definitely in trouble - this would be the time to seek the advice of a credit counseling service if you need help budgeting or need someone to act as a liasion for your between you and your debtors.
For the rest of us, sometimes it's simply a matter of reworking the budget to be able to make small monthly payments toward each debt.
Tally up your debts in a list, largest at the top - smallest at the bottom. After you've re -worked your monthly budget, make sure you've got at least some extra to pay towards debts - but also remember to save money as well. It's ideal to put an equal amount of money every month towards debts AND savings. Don't be afraid to cut out un-necessary items, such as going out to eat, going to the movies, etc. You're achieving a higher goal - becoming debt-free, while in the meantime, managing your debt!
Once you've figured out how much you can put towards debts and savings TOTAL, then start setting the money aside into savings and towards debts - the first payday after you've worked out your budget. Start paying towards the smallest debts first, equal amounts. Say you have three $50.00 debts outstanding, and you have $200.00 a month to put towards debts and savings combined. Put $100.00 into savings, and $100.00 will pay off your first two debts. The following pay period/month, pay off the third $50.00 debt left, then put the remaining $50.00 towards your next debt up on the list. This is called a "snow -ball" technique.
As the months go by, depending on your debt, and your income - you can continue this process and quickly knock-out your debt. Don't be discouraged, you don't have to even have $200.00 "extra" a month to pay off your debts, you can start out with simple $10.00- $50.00 a month to put into savings and get started on your new budget, savings and debt management program. This is the simplest and most effective way to get out of debt and pay debt off.
But once you've gotten started paying off your debts, it's important not to incur NEW debt. Don't get new credit cards, if you already have a credit card - cut it up! It's really easy to say you won't use your credit card for anything except emergencies, but soon enough - EVERYTHING becomes an "emergency," which completely defeats the purpose of paying off debt. While you're paying off debt and adding to your savings, don't go out and finance a new vehicle, furniture, etc. The only "good" debt would be a home, beware however, of mortgage companies and banks trying to finance you for more than you can comfortably afford!
Staying on a debt management program, whether you've worked it out yourself or with the help of a credit counselor, can be difficult. But if you stay focused, remember that you're investing in your future by paying off your debt, you can and WILL reach your goals and become debt-free.
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