Managing Debt
There are several ways in which to manage debt but the most fundamental one of these is to examine your income and your expenditure.
As Wilkins Micawber said in Charles Dickens’ David Copperfield, “Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery”.
The character Wilkins Micawber was modelled on Charles Dickens father John. John Dickens got himself into substantial debt and ended up in the Kings Bench Prison as did the character Micawber. This was a prison for debtors in South London. Fortunately they stopped sending debtors to prison in 1864 and, in the novel, Wilkins Micawber eventually made a fresh start in Australia.
Fortunately nowadays people are not sent to prison for being in debt and fleeing to Australia to escape one’s creditors is not a recommended strategy, but if your expenditure exceeds your income, then it is necessary to take serious stock of your situation.
When managing debt, the first thing you need to do is to see if you can bring your income and expenditure into better balance. Can you increase you income for instance by taking on more work or finding a better paid job? Are there any items of expenditure on which you can cut down by forgoing a few luxuries or shopping at cheaper shops? The best way to tackle this is to keep a careful record of everything you spend for a period of time, say a month, and examine it to find out where your money is leaking away.
If this does not provide a complete solution, then there are other options for managing debt. Examples of these are debt consolidation, setting up a debt management plan, or looking into the possibilities of insolvency through an IVA or bankruptcy, though the last one of these should be avoided if possible. Even if there is no option apart from bankruptcy, life will still go on and within a year you should be out of debt; at least you won’t be put in prison.
Read MoreDebt Settlement Process
Mounting debts can cause serious stress, especially if you no longer have the ability to pay them off. That’s when you should consider a debt settlement process.
This is a process which involves negotiating with your creditors. Most often such debts are credit card related. And we know that credit card companies charge steep interest rates that actually cause all the havoc.
The result of such a process is that the creditors understand that you’re not in a position to pay back the full amount and therefore in a bid to regain as much as they can, they reduce the total amount you owe them by cutting out some late charges or lowering the interest rates.
Of course, your creditor will only do that when he’s completely convinced that you no longer have the ability to pay him the full amount you owe. So, be prepared to show proof to support your claims.
If this process appeals to you, you bring a third party into the picture. These are companies that deal in debt consolidation and settlement. They are the ones that assess your current monetary situation and then enter into negotiations on your behalf.
Note that such settlements can only be engaged in where unsecured loans are concerned. Secured loans (those that have collateral involved) can’t be settled in this manner.
Read MoreMaking A Debt Free Lifestyle A Reality
You don’t have to live with the stress of being way over your income in debt. You can begin working on a debt free life today with the help of programs that are specially designed to eliminate debt. Both debt management and debt consolidation can get you started on the path to ridding yourself of overwhelming debt.
All you need to do is take the first step and contact an agent that will work with you and guide you through every step of the process. Many of these agents have years of experience in the financial field and will be able to advise you of the best options for your situation.
With both programs, you’ll be combining all of your monthly payments into one payment that will leave you with more money each week than you have now. And, with both programs, you’ll be saving money by eliminating a lot of interest that you’re being charged each month.
By working with a financial agent and making a plan, you can literally be debt free in as little as five years. Of course, you’ll have to stick to the plan and learn to follow a set budget, but the rewards will be well worth all the sacrifices that you’ll need to make.
Read MoreHow to Create a Budget
Did you know that more than eighty percent do not live by a budget – and don’t even know where to start when it comes to creating a budget to balance their income with their expenses? A budget is an important personal finance tool that can help you to detail your expenses, find money within the budget that is being wasted and delegate money to certain areas of your life.
The first step to creating a budget is to go over your expenses. It can be helpful to examine bank statements and receipts for up to three months before the time that you wish to establish the budget. This can help the consumer to see where the money is really going. Take these numbers and compare them with the income that is coming into the household – are you over budget?
If you are spending more than you make than you are most likely living outside of your means. Living outside of your means entails accumulating debt every single month. As you accumulate this debt, you sink yourself deeper and deeper, which can lead to unmanageable debt. for example, overspending by even $500.00 each month can lead to $6,000 in debt at the end of the year. If you are already spending more than you make, it can be hard to find a place within the budget to create a repayment plan.
After you have determined how much your expenses are and how much income is coming into the home it is time to make the cuts. Determine where you can save money within the budget and which adjustments are necessary to make ends meet and voila you have created your first budget.
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