Seven Fundamental Solutions to Debt

By Orson

What do you get when you spend more than you earn? Loads of debt! That’s what the average Joe gets, as Americans spend $1.22 for every $1.00 dollar earned! If you are in debt or want to guide someone out of the debt trap, here are the ten most fundamental techniques for debt management. They are simple to understand, easy to implement but entail the most comprehensive solution for debt. So let’s get started:

1. Assess your situation: If you are in debt and still denying it, shed that false skin. Accept the bitter truth. You can never be debt free simple by ignoring your debt. Be honest – you will undoubtedly feel lighter once you are. Feel happier too - now you have started your journey on the road to debt freedom!

2. Know how much you owe: It may be uncomfortable for you when you see the numbers grow as you add up your debts, but the simple fact is that you need to comprehend the problem before finding the solution. So sit down, get all your facts together and take a look at the big picture – who are the creditors, how much payment is due, the interest rates, due dates, late fees/ penalties, everything you are supposed to know about your debt. Then prioritize – essential services like mortgages, credit cards with high interest rates and so on. This will tell you what you need to pay first.

3. Check your spending patterns: All of us know how much we can afford to spend, don’t we? But somewhere between attractive sale offers, tempting gourmet restaurants, dreams of a fun-filled holiday, our spending crosses the lines of affordability. That’s when we get into debt troubles. Wouldn’t it be better if we realized where we fall short? Take a quick quiz and find out how you spend. Or write down all of your expenses over a period of 6 months.

4. Debt Counseling: If you can’t find a clear debt solution, take the help of friends, family, companies that deal with debt management or organizations like the National Foundation for Credit Counseling. Some of your loved ones might have faced the same problems and overcome them successfully. You can get precious advice from them. Professionals are of course experts at providing debt counseling, but before being lured by big promises, cross check the credentials of the debt management company.

5. Reduce expenses: With multiple cards in your wallet, spending was never an issue, was it? But with multiple debts looming large, it’s high time you control your expenses. Even if you think it is impossible to cut back on your monthly expenses, there are some easy-to-implement ways of reducing expenses. Check them out:
a. Carry your lunch.
b. Cook food at home, whenever you can.
c. Switch off and unplug appliances when not in use.
d. To prevent impulse purchases, prepare a list before going out shopping.
e. Plan for off-season shopping – a winter coat when summer is about to set in will fetch you a discounted price.
f. Read the newspaper online; save money and go green.
g. Don’t pay for premium cable channels that you rarely watch.
h. Look into ideas for a fun-filled frugal holiday.

6. Repair your credit: A bad credit score can be as stressful as bad debt. So work out a plan to repair your credit score as early as possible. Get a copy of your credit report from all three credit bureaus. Manage your credit cards responsibly – timely payments to credit cards can help build good credit. Try to repay your debts quickly – start with the ones with higher interest rates.

7. Budget: One reason for falling into a debt trap must have been incessant spending. Preparing a budget and sticking to it can help prevent the recurrence of debt because of such a no holds barred spending habit. A budget, in simplest terms, makes one realize how much he earns, what he has to pay without fail and what the remaining amount is that he can afford to spend on miscellaneous expenditures. More important than preparing a budget is following it religiously. Do it now - if you want to put an end to your debt.

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