Posts Tagged ‘True Extent’
Face Up to Your Debts, They Won’t Go Away
Record numbers of people are struggling under the burden of heavy debt, and when things start to get unmanagable it’s easy to try and ignore the situation in the vain hope that the problem will go away. Of course, we all know deep down that our debt situation has to be tackled, however stressful and scary the prospect might be. So how can you go about facing up to your debts?
The first thing to do is take a long look at your financial situation. How much money can you afford to devote to repaying debt? Are there any ways to increase your income? Are there any ways to reduce your expenses? By drawing up a sensible and honest budget plan you’ll at least know the true extent of your problems, and you’ll be taking the first step to getting back in control.
Next, you need to look at your repayments and expenses, and identify which are the most important. Your mortgage or rent should always be your number one priority, closely followed by essential bills such as electricity and water.
Make sure your budget plan will cover these essentials first, then add in the costs of daily necessities such as food. After you’ve done this you should have a figure for the total cost of your most important expenses. Subtracting this figure from your total income will give you the amount you now have to devote to reducing your debt.
It’s vital to cover the minimum repayments on as many debts as possible, as charges for late payments or missed payments will only push you deeper into the red. If you find that you don’t have enough spare funds to make all your minimums, then contact your creditors and politely explain that you’re experiencing financial difficulties and need help. This step can be daunting, but remember that the person you speak to will only be an employee of a company and won’t take the situation personally.
Most creditors will be happy to come to some arrangement with you to reduce your monthly payments, either by restructuring your debt over a longer repayment term, or switching to interest-only repayments for a while.
If after trying to renegotiate your debt you find you still can’t make ends meet, it could be time to reconsider a consolidation loan. Debt consolidation works by taking out a single large loan to pay off all your smaller, more expensive debts such as credit cards and the like. By getting a loan with a lower interest rate and spreading your repayments over a longer term, you can reduce your monthly bills quite substantially.
Unfortunately there are drawbacks to consolidation loans too. You’ll be going deeper into debt with yet another loan, and will probably end up paying more in interest charges in the long term. You might also find it difficult to get a consolidation loan unless you own your own home or have other assets to secure the loan with, and homeowners will risk losing their home in the future if they can’t keep up the repayments. For these reasons it’s best to think carefully before choosing the consolidation option.
No matter whether you choose a consolidation loan or not, it’s important to remember that debt affects huge numbers of people and it’s nothing to be ashamed of. The only way out of your debt problems is to face up to them, and try to get back in control of your finances.
Confront Your Debts
The first stage of getting out of debt is to work out the size of your problem.to the nearest cent! If you don’t know the true extent of your debt, you won’t be able to do anything about it.
I want you to collect together every statement, account, bill and final reminder that youve got. Add together everything, and I mean EVERYTHING that you owe to other people. This includes, mortgage, rent, utility bills, property tax, the tax authorities, credit cards, store cards, overdrafts, personal loans, hire purchase, car loans, money borrowed from friends and family, other invoices, newspaper bills, even include money owed to the milkman!
Leave nothing out!
Write every amount down on one big piece of paper and then total them up. Find out how much you owe to the nearest cent. Accuracy is vital to focus your mind on the size of your problem. Theres no place for thinking oh, its around ninety-three thousand dollars. That type of thought is all too easy to dismiss. At this stage you need pin point accuracy.
Note down the interest rate on each of your debts. This will show which of your debts are the most expensive in terms of interest charged. Remember to use the APR figure for each debt. In many countries, lenders have to tell you this rate. These figures will be useful later.
Now I realise that this might be extremely difficult for some of you. Facing up to the size of your debts can be a truly frightening experience, especially if youve been hiding the extent of the problem from yourself.
But seriously, I need to make an important point here: What do you think will happen if you keep hiding from reality? Are you prepared to lose everything that youve ever worked for, and more besides? Are you ready for that unexpected knock at the door? Its the Bailiffs. Theyve come round for a chat.and your television!
Are you prepared to become bankrupt?
Because thats what could happen if you continue to bury your head in the sand!
This is not intended to frighten you. I only want to make you aware of the need to face your debt.
Nothing can be that bad. All financial problems can be solved. And the first step is to know how much you owe. So grab a piece of paper and write down the size of your debt to the nearest cent. Just disregard your fear and do it anyway!
On [date] I [name] owe a total of $……….
There, that wasnt so bad, was it? You now have a figure to focus on.
The next task is to make sure that your debt doesnt get any bigger. Then its time to start biting chunks out of it until it is completely gone.
by Stuart Laing
Copyright (c) Get Out Of Debt
