Before you can dig yourself out of a debt crisis, the problem must first be acknowledged. At what point will you discover that the problem will determine how hard you will have to work to correct it. Whatever it is, debt problems deserve priority treatment. Money problems will not voluntarily correct themselves.
Pay attention to the shields.
Savings – There is very little money in the savings account. The risks increase further without a completely savings account.
Credit Cards – How Much of the Credit Limit Should You Debt? If you have exhausted or nearly exhausted your credit limit, you have a repairable debt problem. Pay attention to the interest rates of each card. There is more money to save in the long run if you attack the higher rates first.
Slinging Money – Do you choose which bills to pay each week? Household needs are given priority, but how long do the others have to wait? Do you require late or overdue fees because your salary did not cover all expenses that pay a period?
Alternative Loans – Have you taken out at least one payday loan or cash advance from a credit card to pay off a priority or other debt bill? Both of these options are expensive. If these loans are your only source of help for emergency costs, the debt crisis is an advanced problem.
Debt Burden – If your total debt (minus mortgage) is 20% or more of your monthly household income, it’s a problem. Budget can usually deal with 10-15%. This amount includes the car payment. Make sure the cost of the car will not jeopardize your finances.
A good work budget will easily include home, vehicle, services, gas and food. If the budget does not cover these bills, in addition to something extra for savings and other unexpected costs, you are living an unaffordable lifestyle. Find areas to cut back and redirect the financial problem before it becomes a disaster.
– Stop using all-day lenders. Even if you need another month to pay off the debt, do it. There is a lot of money every week that your budget needs elsewhere.
– Hide the credit cards until you get the debt paid or at least paid. Don’t cancel them unless you absolutely have to. Canceling cards will damage your credit score in any other way. If you have to, cancel more recently acquired ones, as longevity is favored by the lenders.
– Would your budget work more smoothly if you traded in your car for a cheaper model and a lower pay? How about a model with a better gas mileage? Less expensive models cost less to repair than the more chic counterparts. Look at long-term costs when buying a vehicle.
– Do you need to reduce your home to include the expenses in your budget? A smaller home will help lower monthly services as well. Don’t forget to look for neighborhoods with cheap tax rates.
– Break all bad spending habits. Timely payments come before sale prices.
Rewrite your budget. You now have an overview to make better and more realistic decisions to make the new budget work exceptionally well. If you need to work out a payment plan with creditors or payday lenders, do so. These companies are willing to work with clients who are struggling to pay off their debt.
Once your debt crisis is over, don’t go back to old habits. Now is the time to plan for your future. Put the newly found money into university funds and retired savings accounts to prepare for future costs. The sooner you start saving, the longer your invested money will work in your favor.