Debt is not a Death Sentence: Use These 4 Tried and Proven Strategies for Getting Back on Your Feet

Debt is that dreaded four-letter word that has the power to turn your life into a living nightmare. Sometimes your debt can be a consequence of overspending and lack of foresight on your part, but eventually even this will come back to haunt you and cause you countless sleepless nights. However, being in debt is not a death sentence. There are scores of people getting out of debt daily, and some in a short period of time. Follow these 4 proven strategies to get back on your feet and out of debt.

1. Work Out A Realistic Budget

Work out a budget in order to track what your income and expenses are. This will help you see what you have to work with and let you have a realistic viewpoint of the health of your finances. You will quickly know whether you have any money left over or whether you are dipping into the negative. The goal is to move away from the negative, which is your deficit, into the positive or surplus.

Make sure to pay off a lot more on your debt than what is required whenever you can. With your surplus, you can easily knock down a couple of thousands from your debt amount.

2. Reduce Your Expenses

The most obvious way for you to get out of debt is to reduce your spending. Do not succumb to unnecessary spending to try to get out of debt. This will drive you even deeper down the rabbit hole.

Do you spend $300 on weekly groceries and another $300 on eating out? Don’t do that — eat out less, and focus on buying store brands of your grocery staples. Try a more frugal way of living. What you save out of that initial $600 than can wipe out a huge chunk of your debt.

Another way to reduce your expenses is to reduce the number of things you just have lying around the house unused. Declutter your life and sell all those extra goodies just lying around gathering dust, and use that money to pay off part of your debt.

  1. Have an Emergency Funding Source
    In order to keep a level head during times of financial stress, it is wise to keep an emergency funding source ready in case things go south. Yes, this sounds counterintuitive and contrary to what you have to do to stay out of debt, but having a reliable place to go to in times of need will help you stay away from high-interest loans and more credit card debt.

    Acquiring a small personal loan to keep things afloat should not be stressful. In fact, it should be easy for you. You should apply from a place that is well known for fast approval, and where you don’t have to deal with unnecessary delays in receiving the money.

  2. Refinance Your Debt

Refinancing your debt is a method used to move your debt to a vehicle of lower interest rate. This is done by transferring your debt to a different lending company than the one currently handling it. You can also transfer credit card debt to a credit card with a lower interest rate or use a loan with a lower rate to pay off the credit card debt. The idea is to lower the overall interest rate you are paying on all your debt.

It is important to consider and especially read all the fine print associated with closing costs and interest rate rules before signing on your new loan. Do not agree on any type of refinancing until you feel adequately informed and understand what you are getting.

5 Options for Debt Relief

If you’re laden down by debt – whether this debt is from your student loans, credit cards or other personal loan – then you’ll benefit from this path to debt relief. Getting yourself out of the red isn’t simply a case of reducing your spending every month, given inflation and the sheer cost of even everyday things these days.

One of the avenues comes from BBB accredited debt relief program reviews, which provides confidence to the average consumer that this is a company that can help. You can have either a secured loan or an unsecured loan – there are options available to address either.

  1. Transferring Your Credit Card Balance

In response to the economic climate where debt is a growing issue, many credit card companies actively promote the possibility of balance transfers from your existing card to theirs – and this comes with an enticing 0% annual percentage rate for the first half-year – sometimes, up to the first two years!

A 0% APR means your monthly payments are only going towards the principle; you’re not on the hook for the interest on the balance for that period of time. A word of forewarning, though: remember that risk is directly proportional to creditworthiness, so high credit scores are generally a must to receive offers like this.

  1. Interest Rate Options

This is an expanded continuation of the above, as not everyone will have the FICO score necessary to receive a 0% APR offer. In fact, you can be proactive in this regard: give your current creditor a call and schedule an appointment – online, or in person – with an account manager. You may be able to obtain a lower interest rate.

The benefit of this is that more of your payment goes towards paying back the principal each month, instead of to settle the risk the creditor is undertaking as determined by your creditworthiness.

  1. Debt Consolidation

You might ask – why would anyone ever want to consolidate their loans? Well, for starters, if you have a lot of credit card debt, then you’re aware of how high the interest rates are on these when compared to what you can get with an average credit score on an unsecured loan. As such, there are quite a few companies out there willing to give you a personal loan at a lower rate; by consolidating all your other debt, you end up paying more money towards the principal with each payment.

The only debt you shouldn’t consolidate together are federal and private student loans – they often have widely-varying rates. Avoid crossing barriers; although of course, you can consolidate different federal loans with each other, and the same for different personal loans.

  1. Debt Forgiveness or Settlement

This option requires more research than the others, as the pickings are slim, so to speak.It’s the last step before a collection agency may step in, and accomplishes a similar function without as much of a hit to your credit history (or any at all, in some cases). Speak with your creditor about the possibility of paying a single payment that’s a sizable fraction of what you owe; they may forgive the remainder of the debt if you can do pay right away.

  1. Managing Your Debt Using an Assistance Program

Lastly – for this article, at least – debt relief in the form of credit counseling has been shown to work for quite a few people. How does it work? The agency takes on your principal, and works out a deal with your privately that lowers your monthly payments to something more manageable. Of course, you’re likely paying for their services, but this amount will be tacked on to the overall payment over the long term.

3 Primary Causes For Debt

For many people, the word “debt” sends a shiver down their spine. They either have unmanageable debt or have escaped a frightening situation where this was once true for them.

It’s not a word that is used lightly in a conversation. The reason debt triggers such an emotional charge is because we link our well-being and survival to money, and when we owe more money than we are bringing in, then we feel a sense of dread.

Options for Debt Relief

If you have debt, you have 3 main options:

  1. Self-help. Help yourself through learning money management techniques like budgeting. You can take classes in financial literacy to get better at managing your money.
  2. Ask for help. Work with a debt relief services, like debt settlement or debt consolidation. Only work with a reputable firm, so do your research before signing up for any program.
  3. File for bankruptcy. In an interview on the Wellness Hour Consumer Report, host Randy Alvarez interviewed Michael Doan from the Doan Law Firm about bankruptcy filings as a way to cope with unmanageable debt. Mr. Doan said that many people wait too long to file for bankruptcy, filing after they deplete assets that could have been protected in a bankruptcy filing.

Reasons for Debt

There are three primary reasons why people go into debt:

  • First, it’s because of poor money management.
  • Second, it’s because of inaccurate thinking about money.
  • Third, it’s because of unexpected financial problems.

Let’s take a closer look at these 3 categories of debt.

Poor Money Management

  1. Financial illiteracy.

Money can be said to be a game with rules. If you don’t know the rules, you are going to be on the losing end of the game. Managing money is not as simple as earning a living and paying bills.

Schools don’t teach skills like how to balance a paycheck, and few parents sit down with their kids and explain the value of saving and investments and how to avoid clever sales tactics. It’s important to get an education about how money works.

  1. Financial neglect.

Education about how to earn money, how to spend it, how to save it, and how to invest it, isn’t always enough.

You may, for example, know how to create a budget, but still not do it. Yet without this simple tool, you might be spending money unnecessarily on things you don’t need while not having enough money for some necessary expenses.

Usually, the problem is not a lack of skills but a psychological issue related to not wanting to take financial responsibility.

  1. No savings.

Many people don’t like to save because of inflation. Since the purchasing power of their money dwindles over time, they are losing money by parking it into a savings account. Although they earn interest from their savings account, it is less than the rising cost of living.

However, in an emergency, like the loss of a contract if they are self-employed or the loss of a job if they work for someone can create a crisis. With 3 to 6 months savings, they could manage the sudden loss of income and find new income opportunities.

  1. Underemployment.

After a job loss, a person may have to settle for a job where they are underemployed.

However, this situation may continue for a longer time before they anticipated. In the meanwhile, they may still be paying the same expenses that they were able to handle when they had better paying employment.

Inaccurate Thinking

Sometimes debt occurs because of inaccurate thinking about a life situation.

  1. Inaccurate thinking after a financial loss.

Sometimes after an unexpected financial downturn — like reduced hours offered by an employer or a decrease in sales — people don’t adjust their expenses.

They spend the same amount as they normally did and not make any adjustments to their old spending habits. As a result, they begin to rely more heavily on their credit cards to manage the discrepancy between income and expenses.

  1. Relying on an expected windfall.

Sometimes people don’t manage their money well because they are expecting an inheritance or some other type of future windfall to compensate for their current overspending.

When these don’t materialize as expected—for instance, their relative may have only pretended to be wealthy—they find themselves short of the money they need to pay back all their expenses.

  1. Addictions.

Sometimes the desire to consume is greater than the means to do so. Besides the high cost of sustaining a drug addiction, there are also other types of addiction like gambling. A person who has an addiction finds themselves unable to stop despite the obvious negative consequences of their behavior.

Unexpected Life Circumstances

Sometimes people can be doing everything right when it comes to managing their money, but experience circumstances that completely drain their assets.

  1. Divorce.

This can be devastating for one or both parties. Besides the psychological pain, there are numerous expenses and losses associated with getting a divorce.

  1. Medical expenses.

Just a few days in the hospital can put you in debt for tens of thousands of dollars if you don’t have coverage.

  1. Death in the family.

The death of a loved one can create a lot of sudden expenses. Money has to be managed. It doesn’t matter how much or little you have, it has to be managed to avoid debt.

The bottom line is that money has to be managed:  It doesn’t matter how much or little you have, it has to be managed to avoid debt.

Six Steps to Paying off Debt and Investing in your Future

canstockphotoIf you were to lose your job tomorrow would you have enough saved up to pay your monthly expenses? What if you were to retire next year or the year after, do you have enough money saved up to cover your expenses and any medical bills that are likely to arise?

Consumer debt has taken control of many budgets. If you are struggling to pay off your debt and wonder how you can possibly save for the future when you have so many bills to pay, don’t lose hope. Learn to take advantage of financial support programs to help with current finances and start learning positive financial habits. Overtime you will eliminate your debt and begin accruing money which you can invest for your future.

Here are six steps to help you on your way:

1. Ditch the credit cards and stop taking out loans:  The most important thing you can do first is to stop accruing debt. So stop spending money you don’t have. Don’t take out a car loan. If you have to buy a junker until you can save up money for a better car, do it. Or better yet take public transportation and skip the insurance and gas payments.

2. Save up an emergency fund: Start saving enough money to cover at least one month of bills. Keep making minimum payments on your debt until you have saved up at least $1,000 to use in case your car breaks down or you have unexpected medical expenses. Having an emergency fund at hand will ensure you don’t have to rely on credit cards when the going gets tough.

3. Pay off your smallest debt first: Put anything extra you have towards paying off your smallest debt. (Sell things, use tax returns and cut back on extras). Once you have your smallest debt paid, you’ll feel a sense of accomplishment which will help you stay motivated. As soon as that debt is paid off take all of the money you were paying towards that bill and pay it towards the second lowest bill until it is paid off. Continue stacking the funds until you pay off your final debt. This is commonly referred to as debt stacking or the debt snowball.

4. Don’t fall into bad habits: Once your debt is paid off, don’t go back to spending a ton of money. Consider building up your emergency fund a little bit more and using the rest of the money to invest elsewhere. Have a plan for how to use your money so you don’t start spending irresponsibly.

5. Invest wisely: When you are planning for retirement, investing wisely will help ensure you have enough money when you need it. Talk to a professional planner or fiduciary, but also learn as you go, your money is ultimately your responsibility.  Ideally you should avoid putting all of your money into one investment, diversification is key. Check out annuities, mutual funds, shares, real estate among other financial investments.

6. Reward yourself: Paying off your debt and beginning a retirement fund is hard work! Plan a fun reward for when you get all of your debt paid off. Consider a fun vacation or a nicer car. Remember to pay for your reward in cash! Once you’ve paid off your debt you may want to keep 20 percent of what you were paying towards debt for extra fluff to your account and use the rest to invest in your emergency fund or your retirement account.

Hard times may come in our lives where we need some cash to fall back on.  By taking a few steps today, we can enjoy better tomorrows.

Australians Are Still Struggling with Massive Credit Card Debt Issues

httpwww.onmoneymaking.comAlthough the recession has put a brake on the Australians addiction to plastic fantastic, it seems like the latest figures released by the Reserve Bank indicate that credit card debt remains an issue. According to the data issued forth by Australia’s central bank, Aussies are still amassing a massive amount of debt, currently standing at $50 billion. The past two years have seen the level of credit card debt oscillating between $48 and $50 billion – a large amount, by all standards, yet still nowhere near the impressive levels of the three decades that preceded the recession. That span of time saw the level of credit card arrears grow by 28 per cent each year. And while the global financial crisis has made consumers more aware of the impact that credit card debt can have on their lives, it’s likely that both past attitudes and current market regulations continue to influence the way Australians manage their arrears.

Aside from the cold, hard facts that the central bank made public, it seems that commercial banks are also contributing to the problem. The recent credit card reform in Australia has made conditions for inquiring credit card owners about credit limit increases more strict. Nowadays, a credit card holder can only receive an offer for a credit limit increase if they have specifically agreed to be handed such offers. However, they do still receive them, and often enough to actually buy into them. After all, it seems innocent enough: the bank agrees to let you spend more money – but if you’re cautious enough, there’s no need to end up piled-high in debt because of over-spending. What can go wrong?

Quite a lot according to mortgage brokers, including being denied your home loan. The bank’s take on your credit limit is that, the higher it goes, the more likely you are to have trouble in paying back your mortgage. This is especially true for mortgage loan applicants who have several credit cards and who do not spend up to their credit limit. The advice from Bankwest Credit cards is for credit card holders to be on their ‘best behavior’ in paying back the credit in time and in full, while also limiting their number of owned credit cards to the absolute bare minimum.

The way things stand right now, with many consumers seeking to lower their debt, it still looks like Australians are a long way away from paying off their credit card debt in full. According to a December survey, carried out by a banking product comparison website, some 11 per cent of the people polled acknowledged they were only making minimum repayments of their credit card debt each month. That means roughly 1.7 million credit cards are still largely unpaid for – and it’s going to take a lot of time to fully cover
that debt. A spokesperson of the website that carried out the poll said that, at an average minimum monthly payment of 2 per cent, with an average balance of over $3,200, it would take holders almost a quarter of a century to fully pay back their credit card purchases. On the one hand, that means the holder would be paying more than double the balance in debt alone. On the other, it draws attention to an even more jarring fact: paying off a credit card in full could take 24 years and 5 months, well over the average time span for paying off a mortgage.

Do you need to look closer at your gambling habits?

canstockphoto8590868Gambling is, like many other vices, one of those things that people need to keep a watchful eye on.
It can be very easy to see your gambling get out of control and, before you know it, you could be suffering from large amounts of debt. This doesn’t necessarily mean that betting has to be off limits; it’s more a case of ensuring that things don’t get out of hand and lead to the need for IVA advice. So, for instance, if you find yourself gambling sizable amounts of money every day then it may be time to try and curb things. Done in moderation, betting can be enjoyable, while also bringing in a bit of extra cash into the coffers but, it’s essential that gamblers don’t go overboard and risk losing everything.
Quitting while you’re ahead is the mantra to follow.

Gambling machines

There are plenty of different forms of gambling, all of which have obviously inherent risks involved.
One of the main troubles that come with automated machines is that they are located in various locations, from service stations to airports to pubs, meaning temptation is always there.
Furthermore, as these usually operate on small denominations such as ten or 20 pence pieces, it can seem as though you are losing less then you actually are. It’s a topical issue too, as recently the government launched a £500,000, 18-month-long study into the effect of gambling machines on members of the public. It is being carried out by Responsible Gambling and the results of the study could well influence whether or not government action is required.

In-play betting

This is also known as live betting and is seen as one of the latest and greatest advancements by betting firms, as it allows people to bet on games and sporting events as they happen.
Next goal time, scorer and team markets are all available and this can present a danger for those who struggle with gambling due to the range of options available. As things go, this is one area where it’s so important to keep a handle on your betting. The instant nature of this type of gambling means you can lose sizeable amounts quickly, with many hurrying then to put a big stake on to try and win their money back. Rushing into bets and placing big stakes is not a sensible way to go about things and, no matter how experienced and knowledgeable you are in terms of what you are betting on, it’s imperative to take your time and think calmly.

Have a betting budget

One way of keeping a tight handle on your gambling purse strings is to have a specific budget.
So, if you have an online account, deposit a small amount and then work solely from what you accumulate. Start off with £5, or a similarly small fee, and see if you can build that up over the course of time. Not only will this get rid of the need to withdraw money from your bank account, it could also boost your income in a small way too. Obviously, there’s no point simply gambling all the money in this pot away quickly and refilling it with money from your bank account, so set a limit on how often you are allowed to put money back in. This will force you to be sensible with the amount you gamble and how much you bet on.

Ultimately, the best way to see whether or not you are gambling excessively is to take a step back and look at exactly how much you spend each month in this area. Look at how successful you are and also consider your motives for this level of gambling. Is it becoming a compulsion, rather than something you enjoy to give you a small buzz now and again? If so, it’s important to cut back completely for a while or seek professional advice. Gambling is something that affects people in many different ways and, while some can cope with little and often, for others it becomes an addiction that can quickly lead to a debt spiral. It’s not only addictive because of the initial enjoyment but also due to the desire to win lost money back, so ensure you don’t take it lightly.

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