(This is a guest article by Sharon Marthers*)
There were times when I used to allow my heart to rule as far as my personal finances are concerned. I thought it was the coolest approach that I could ever have until I realized that it wasn't a good idea after all! Well, I had to admit that one doesn't get into a debt situation in a jiffy because it builds up gradually and seeps into one's finances in a clandestine manner. Guess what? It even took me a long time to get out of it!
So what did I do to get out of it anyway?
I came across billboards that offered me debt help and was requested to enroll for some kind of debt relief option in the process. They seemed they might be effective initially, until I found out that they might not be the same for all and sundry. So, I took some personal measures first, such as, evaluating my financial situation and then finding the particular debt relief option that would be suitable for me. In the midst of this storm, here are some measures I used in order to withstand the storm and come out of it:
- Avoid borrowing money to get out of debt
- Use cash and minimize credit card usage
- Attend to debts that have higher interest rates
- Pay more than the minimum monthly payments
- Work out a budget and track expenses
- Check your credit report periodically
- Read TOS while accepting credit cards
- Save for the rainy day
- Don’t be extravagant
- Take professional guidance if required
It is not a very bright idea to take loan from Peter to pay off Harry. It could have added up to my existing debt burden. If taking a loan to consolidate all debts, it is always better to use collateral. In case of a collateral (secured loan), the rate of interest is also less and if you fail to make payments your collateral is taken away by the creditor. So, if at all you are availing another loan, try to take a secured one as you will always have the fear of losing your assets due to non payment.
Although you are using plastic money to shop around, sooner or later you have to pay that money. You cannot defer the payment for months. So, if you are using cash, it is better because you tend to shop around depending on availability of cash.
You can wrap up your debts and get out of debt by following 2 methods. You can either make payments for the debts that attract a very interest rate. Alternatively, you can attend to debts that have lower outstanding balances. However, I opted for the former.
You may have come across precepts urging you to make payment for the minimum balance every month. Undoubtedly, it is true but you should pay more than the minimum balance. By doing so, you not only make payments for the interest but your principal amount also reduces in due course.
Work out a budget and spend accordingly. Identify expenses that can be curtailed. The amount you save can either be used to pay off debts or you can make an emergency fund with it.
You are entitled to a free copy of your credit report every year from the 3 credit bureaus. Get hold of your credit report and check for irregularities. It may be that you have managed your finances very well but the same isn’t recorded in your credit report. Your report may have inaccurate information entered. If it so happens, get it rectified without delay.
Reports suggest that majority of the credit cardholders fail to manage their credit cards well because they are not aware of the terms and conditions when they accept the cards. When they are implemented, you fail to cope with the same.
Save for the rainy day. It can bail you out of a financially stressful situation when you are in real need of it.
Avoid holiday “hangovers” and impulsive shopping. If you can defer buying an article, put it off for a later period.
Don’t hesitate to seek professional help if you are not being able to manage your finances well or you are likely to face financial crisis in near future. It is rightly said “Prevention is always better than cure”.
*About the author: Sharon Marthers is one of the financial writers associated with the Debt Consolidation Care Community. With her in-depth knowledge and vast experience, she has had a profound impact through writing and advising on all debt consolidation issues and has presented useful tips to get out of debt. Her remarkable guidance and support has improved the community into a global hub for the debt related situations.
*Image Credit: Photograph by gaspi *your guide [via Flickr Creative Commons]