Everyday people work hard to earn an income and spend it on living expenses. Families that are just starting want to purchase a starter home, a high school student going to college will need a loan or buy a new car. Unfortunately when we want to acquire big items or borrow money then add a major credit card we find that we are now in debt. There are people in our society that have been in debt for a long time and they wonder if one day they can be debt free. The answer is yes you can by taking a step in finding the right strategies for managing your debt. It is important to not to feel overwhelmed or frightened by being in debt. You need to move toward the financial ledger with some ease and logical thinking.
Looking at Personal Assets
Finding the strategies for managing your debt will be no easy task. You need to first look at all your assets beginning with the amount of life, homeowners and car insurances total worth. You will need to know the amount in all of the savings accounts along of what is currently in the checking account. As well as the full value of any 401K, stocks, Roth IRA’s, traditional IRA’s, mutual funds, certificates, money market and other retirement plans that may be partially sold to get cash to help pay against the debt. You also need to have an assessment done on any valuable jewelry or heirlooms that might have a cash value.
Establish what you owe in secured debt for long term:
- Mortgage payment for 15 to 30 years fixed.
- Monthly car payment for at least five years.
Establish what you owe in unsecured debt:
- Major Credit Cards like Visa, American Express, Master Card and Discover Card.
- All credit cards are unsecured debt including Exxon/Mobil gas cards.
- Pay close attention to interest rates when you decide to get a credit card.
- Property, personal possessions and liabilities should match is a fundamental rule for financial institutions, company 401K’s and trading firms is that over a period of five or more years can come accessible when you need them for example for the time a child is going to college or for your retirement.
- This scenario should be avoided at all cost; do not borrow money from a lender for a long-term or more than five years when purchasing a new or used car, because simply you will still be paying on the loan when it is time to hand it down to your children or worse yet it goes to a scrap yard.
- Variable loan interest rates depend on whether the stock market goes up or down of course for the past few years this has not been an issue because they rates have been at record lows. Consequently what goes down will eventually go up and you will pay more on each loan.
All of us are consumers and when we have monetary fund’s we enjoy spending more than what we make. Millions of people like you stink at managing what debt is left and planning strategies for managing your debt is a responsibility to get control of the debt.
Prioritizing and Time Management
You will need to start with the bills for example; utilities, mortgage or rent and insurances. These are important so keep making the payments so that you have a home to live in and electric for the lights or appliances. In addition, you still need to make the necessary minimum payment on any major credit cards. The bills that are overdue for several months will be given to a debt collector or agency.
It is important to try to make an effort of partially paying them as much as you can or set up a payment plan with the collection agency. Also equally important at this time you will need to contact all the creditors. If you communicate with them on the phone, in person and now with advance technology video call then through email correspondences; they will help you by negotiating and reducing the payments where you can afford to give them some money each month.
If the debt is caused by several student loans then you need to call the loan department of the financial institution that you got the loan from in many cases they will give you reasonable payment plan. If it a federal student loan given by the government then you can request yearly for the loan to be deferred or forbearance. Consequently when you decide to do this you will need to explain the financial hardship you are going through whether it is the loss of a job, a death of a loved one or ongoing medical bills from a serious illness.
This is why it is important for finding the right strategies for managing your debt. It is never too late to start and you will find that keeping a budget plays an important part.
Budget Sensibly, and Time to Save
- Budgeting requires not just you to cut surplus of everyday expenses but your significant other and children should be part of the necessary cut backs. This way everyone can help. Another important factor to keep in mind is when purchasing items do it in cash or use a debit card as much as possible to help in using plastic/credit card purchases. This will help teach your children responsibility with money. Unfortunately, any debt has to be maintained monthly as a regular expense within a budget.
- This is the time to put money aside into a savings account even if it is a little at a time just in case more money is needed for paying some of the debt. Children and family members also should begin saving. Many banks have special accounts for children so they can bring in their piggy banks and watch their money be placed in a safe place. You will find that the once the burden of having debt is gone is rewarding now. However, if you have been using a retirement fund to pay off the debt then the strategies for managing your debt might need more than serious intervention.
- As a matter of fact like you and many others matching the assets and liabilities do not match. We are tempted to use what is called liquidating our savings. This is not good idea but instead pays down your debts at a slower rate and use the 401K because the company will match it as part of retirement. It is best to try stay away from going into your retirement because when it is time to retire you want to enjoy life and not have to worry about paying off the dreadful debt.
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