Tips on Preventing Debt


by Hazel - Date: 2007-01-25 - Word Count: 998 Share This!

Consolidation is nothing but the process of negotiating the rate of interest that will ultimately determine by how much the borrower's payments will be reduced and what his overall settlement will look like.

More and more consumers today find themselves in the uncomfortable situation of only being able to afford the minimum payments on their credit cards. Or, even worse, not being able to afford even the minimum payments. In today�s world, it is often easy to get in over your head and find yourself spending more than you make. It seems that everything is going up but wages, and it is all too easy to fall behind.





Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?

You�re not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming.



On top of necessary expenses, many consumers dig their debt rut even deeper when they rely on credit cards to pay for necessary goods and services.



Tips on Preventing Debt



The only time people go to the doctor is when there�s a problem. Working out regularly, taking vitamins and visiting the physician regularly are the best ways to prevent sicknesses. These steps prove that the proper precautions can help patients from ending up in a hospital bed.



Prevention in another form can also be applied to the consumer. Instead of getting sick, the individual can work on a budget to avoid getting into trouble and paying off debt.



The first thing anyone should do is to write down the list of expenses. This can be done weekly or monthly which should includes the amount spent on gas, rent, utilities and clothing.

Next, the person must determine which of these are luxuries and which are necessities. The objective of this exercise is to check how much is earned in a month compared to the amount that is spent.



Should this be more than what the employee is earning, then some cutbacks needs to be made. This should be stripped down only to the essentials so that there is money available in case of emergencies.




Bankruptcy is not your only option. Millions of people credit is devastated by bankruptcy every year. Though filing a Chapter 7 Bankruptcy will clear you of any obligation to creditors, it is devastating to your credit and will ride your credit report for ten years.




Your bank may be all too glad to lend you money to help you consolidate your debt. However, banks also charge application fees ranging from $50 to $200 or more per loan. In addition, banks make getting a debt consolidation loan difficult as approval for this type of loan is hard to get especially if your existing debt levels are high.



The higher the score is the better looking your credit appears and visa versa. Many individuals or families with a large amount of debt have a low credit score; therefore, they are generally unable to receive loans or credit cards.


Make a Budget. If you want to have a grab of your financial situation before you lose everything, making a budget is what you should do first. Assess how much do you get from your income or other means and your expenditures. For example, if getting that posh apartment means you have to limit your meals to once a day, then it is not a great and sound budgeting decision.




Find out how long it will take to become debt free and how much you'll pay in interest by making the minimum monthly payments.




Before buying anything, the individual must always ask if this is really necessary. If not, then this is one thing the consumer can walk away from without feeling any regrets.



Sticking to this is very difficult if the person has always lived a lavish lifestyle. The reality is that there isn�t that much money around so it will be a good idea to just put up with it until maybe the salary increases or a better opportunity comes knocking at the door.

The only way to know if the plan is working is by writing down all the expenses made daily and comparing this with the original list done a few months ago. If some money has been saved, then it is effective.



The cash should be deposited in the bank or invested in stocks so that this will grow and earn some extra income.



People need money to survive every single day. This is to put food on the table, clothing to wear, gas for traveling and payment for utilities.

Regardless of the amount of dollars earned monthly or in a year, the person must still know how much money is on hand and where it is spent. This is because it is only through budgeting that debts of small or large amounts can be prevented.






However you got into debt - unexpected financial difficulties, illness, loss of providing member of the family or overspending - you can turn to several organizations and charities for advice.

A debt consolidation loan is an option. But a debt consolidation loan might not be right for you. You might be able to consolidate debt, even credit card debt, with a remortgage.


Debt is a hard thing to live with, reduce debts today!


Stop spending on things that aren't absolutely necessary. Each individual will have to define what "necessary" means, but it may mean taking a sack lunch to work, bringing your own coffee instead of stopping at Starbucks, and canceling that subscription to HBO.



The first step toward taking control of your financial situation, is to do a realistic assessment of how much money you earn and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses � those that are the same each month � like mortgage payments or rent, car payments, and insurance premiums.

Related Tags: debt reduction, reduce debt, reduce credit debt, reducing debt

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