Finance Book

If you’re hugely in debt, you are definitely looking for a way to manage your debt. This is possible either through self-help efforts or by getting some help from a trained expert from a debt reduction management company. It’s all up to you how you help yourself, but you should follow some advice from books, magazines and other sources if you want to reduce your debt and financial burden.

So, would you like to manage your debt? Here’s how.

1. Debt consolidation.
Debt consolidation is one of the solutions for you if you want to make paying your debt easier. While it does not change how much you owe – so for example, if you owe something like $40,000 to some lenders, you will still need to pay that much but this time, you will only have one lender to pay – you will get to pay much smaller rates, making it easier to pay off your debt.

2. Cut back on expenses, and make more money as much as possible.
This means many things. This means lowering your spending on things that are not needed or can be replaced with cheaper alternatives to help you save money. For example, stop unneeded subscriptions to magazines and cable. Stop buying new stuff every time. Stop using your credit cards when you go out. Stop eating out every lunch time. The money you save from doing these will go towards your debt payment and will help in your debt elimination efforts.

On the other hand, make more money as much as possible to increase your monthly payment. This is possible by having a secondary job or a business which can increase the amount you pay for your debt and at the same time, you should keep paying off your debt and not incur any more.

3. Set up a payment plan with your creditors.
Arrange a payment plan with your creditors so it will be easier for you to pay off your debt. Just explain first if you will do this, that your situation is only temporary and you are going to follow your agreement. When you pay off your debt, you should remember that you have rights, too, and there is a law that protects you from debt collectors. The Fair Debt Collection Practices prohibits debt collectors from calling the debtor before 8 am, after 9 pm, and when they know that your employer does not approve of their calls. It protects debtors from harassment. Also, they should honor your written request telling them to stop harassing you.

4. Avoid defaults and foreclosures
Most car loan agreements allow creditors to repossess your car if you’re on default. If you want to get it back, you need to pay the available balance as well as the towing and storage costs. So if a default is highly possible, sell the car right away and pay off the loan from the profit you made instead of being on default, which is worse, because it will be marked on your credit report.

On the other hand, you should also avoid foreclosure if you are paying off your mortgage loan. If you can’t pay off your home loan, you can solve this problem by talking to your lender and see if he will agree to another payment plan with you. A lot of lenders are willing to suspend your payment schedule or set up a longer payment term. But if that’s not possible, you may try contacting a housing counseling agency. Some of them offer free assistance to anyone who has problems paying off their mortgage loans.

5. Use the service of a debt help settlement company.
A debt help settlement company is there for those who are too overwhelmed by their large debt problems. You will need their help if you:

a. avoid calls and mails from debt collectors because you want to avoid their harassment
b. you don’t want to go out because you feel bad about your financial state
c. you just don’t know exactly how to pay off your mounting debt that seems so big you can’t do it on your own

You should first do some snooping before you give your financial information to a debt reduction management company. But you should prepare, though, to follow their advice, because your debt help counselor will follow up on you to make sure you help yourself and reduce your debt.

There are many other advice regarding debt management and settlement. Visit my blog for more tips on personal finance.

By: Marie Roxas

Credit card debt does not build up in a day. I cannot tell you how many times I cleared off a credit card, and then stuck it in my safety deposit box. I vowed to only pull it out in the case of the direst emergency. I promised to buy myself a treat if I could keep it clear of any new charges for six months. In addition, I intended to put away the cash for my next vacation, in addition to setting aside an emergency fund every month! I had the best intentions of living the debt free lifestyle.

But then time passed, and very often, it was not that much time. My car might have needed new tires, or my vacation fund had not grown into an amount sufficient to last for a couple of days, much less a whole week! I pulled out my credit card, still promising myself that I would only use it one time. I would pay for the new tires, or only one night of a hotel room. But then, once the plastic was in my hand, I could not resist the pull of using it again. Within a few weeks, I had accumulated a hefty balance. Within a few months, I was near the credit maximum on the card, and now again, faced the long process of getting it paid off. The whole thing had creeped up on me, but once it got out of hand, I had a hard time seeing how I could ever chip the debt away again.

I realized that if I only paid the minimum, the balance would never go down, and sometimes would even go up. It seems that credit card companies design it that way. I knew that I had to really come up with a strategy to pay off the debt and manage future temptations. That is when I got the idea that the whole process was a lot like the process of sticking to a sensible diet.

Goals should be reasonable. Just like you might set your first weight loss goal to losing 10 pounds, or dropping one pant size, in 6 weeks, so you should look at the one balance that would be the easiest to pay off. So go ahead and pay the minimums on the rest of the cards and do everything you can to attack the lowest amount. Also set aside one more payment as a deposit to your own personal savings account. You would be surprised, but by saving only $25 or $50 a month, you can have some cash on hand to make it easier to keep from pulling out the plastic! Once you have done this, you will feel satisfied because you will have reached a goal.

Now you can set that card aside for emergencies, and work on the next smallest amount! When the second one is paid off, I would suggest destroying one of the credit cards. Now you have only one to use for emergencies, and not two! Of course, I would pick the one with the lowest interest rates to keep!

Of course, this all presumes that you have enough income coming in to fund your new debt free lifestyle. I know it can be hard, but try looking for some ways to supplement your income. Can you offer to watch the neighbor’s kids while they have a week-end date? Garage sales can be more profitable than you think. And of course, you always have the tried and true strategy of cleaning out your closets and selling clothes, books, or dvds on the online auctions. It can be a bit of work, but you’ll be satisfied to collect some extra money to put towards debt and savings. And actually, things like selling on EBay and holding garage sales can also be a lot of fun!

If you fall off the wagon, and use that card for a new dental crown or a night out, do not punish yourself. It is the same as dieting, and when you allow yourself to over eat at a party. Just wake up the next morning, and start again. Even if you cheat once in awhile, you are probably still better off than if you never tried to pay your debt off at all.

By: Marilyn Katz