People tend to fear what is unknown which is why most of us would rather not look at how much debt has mounted up from our spending sprees. Debt can be very stressful when you finally do take a look at the bills and have to find a way to pay-off all what you owe. Getting out of any financial crisis requires a great deal of effort that can only be achieved through great sacrifices.
Prepare a List
First things first, take a realistic look at your debt situation. Write down your incoming money and outgoing expenses to help you find out exactly where your money is going.
The list should be thoroughly inclusive of all things from your phone bill to your groceries to your petrol to those little treats you sneak yourself, like morning cappuccinos.
Writing a list will show you how much money you have left over to tackle your debt after you have paid all your living expenses. Your written account can also be used to show your debtors how you are managing your debt.
Cut Back on Spending
This part requires you denying yourself of those daily items you spoil yourself with. It’s not that hard but these few minor changes can save you a substantial amount of money.
•Reduce spending on transportation by taking the bus to work as it is most likely cheaper than driving your car there. If your work is close, try riding a bike or walking.
•Save on food costs by taking lunch with you to the office rather than buying food from a café or sandwich shop. In addition, fruit and vegetables are usually much cheaper than prepared food and are more beneficial to you.
•You can save money on expenses such as gas and electricity and your home phone by switching to a cheaper supplier.
What Debts Are Most Important?
Now it’s time you work out what needs to be paid off first and to whom. Begin by making regular payments to your creditors, even if they are small. If your creditors see your commitment to sorting out your debt, they may give you some leeway while you find out a payment strategy.
Some debts are more important than others. It is a good idea to prioritize your debts according to how they will influence your life. So, for example, your gas and electricity should be a high priority so it doesn’t get cut off.
Write a letter to each of your creditors telling them that you are facing some financial difficulties. Your letter should be straightforward and should consist of your financial statement and your list of debts. To negotiate with your creditors effectively, consider the following advice:
•Begin your negotiations with the debt closest to its final payment.
•Be sure never to commit yourself to making payments you can’t afford.
•If your creditors do not see eye to eye with your reduced payment offer, pay the amount anyway. It will ease your debt and possibly persuade them to change their mind once they see you’re steadfastness.
•Finally, be sure you get receipts for your payments and finalize all agreements in writing.
Work Out a Debt Plan
Making a debt plan demands motivation and commitment because you need to find out how you are going to deal with debt over a long term. You can use spreadsheet budget templates such as Microsoft Excel Templates to assist you in creating a personal budget.
Though, for a faster way out, you may want to consider trying to pay off all your debts by taking out a loan and then making a single payment towards the loan.
During this period of financial crisis, however long it may be, try to decrease your regular spending as much as possible. Purchase used items, repair what is broken, and abstain from luxuries. Put your savings toward getting out of debt. A good idea is to make payments in the middle of the month if you have to in order to keep from spending much needed money.
Consolidate Your Debt
Consolidate your debt by either consulting a debt consolidation service or doing it yourself. If you’re not that deep in credit, you can get a low interest card that has no interest on balance transfers and then shift all the debt from your high interest cards to the new card. However, the risk behind this option is that you move the debt to the new card and then add up additional amounts on the previous card.
The advantage about contacting a consolidation services is that they force you to close all of your credit accounts and they give you one monthly payment, so they basically manage your money for you. The only drawback about this is you are left with no credit cards, whatsoever, in case of emergency.