Debt management is a plan and a system that you have to follow when you want to come out or stay out of the debt trap. In this modern world, there are a variety of loans offered apart from the credit cards from various banks and financial institutions. While these cards may seem to provide you with an easy access to money anytime you need, it also leads to closer to the deep, black debt hole at the same time. Carrying the highest rate of interest of all types of debts, these debts are the ones which all prudent finance managers should avoid.
Take the right step towards debt management by using credit cards as less as you can. However, when you have a considerable amount outstanding against one or a couple of your credit cards and you do not have enough and proper means to pay off the monthly bills, you will frantically look for ways to repay. In such a situation it is even possible to take on more debt. Moreover, the constant calls from your creditors reminding you about the payment as well as the consequences of not paying up will put you into a further stressful situation.
Therefore, it is always recommended that you use your money well so that you can manage your finance well. There is no harm to have a debt as long as you know the ways to come out of it. It is only a proper debt management plan that will see you through.
Whether it is unsecured loan such as your credit card debts and personal loans or the more secured ones such as home and vehicle loans, you will have to set some pre-determined goals to pay off your debt and be debt free. It will require a lot of self-discipline, time and a proper budget to reach to your goals. Apart from that, you must also monitor your progress towards it regularly so that you are on the right track of debt recovery.
The steps to follow
The most significant steps you have to follow for better debt management are as follows:
- When you are in debt, you must distinguish between your needs and wants. This will save you from overspending on wants that can be postponed till the time you attain financial freedom. Focus on your wants more to stay away from debt or at least reduce it by a considerable margin.
- Keep your credit cards away and well out of your reach. Instead, use cash for your purchase. This is also another effective way to prevent overspending. This will help you to stay very conscious about your expenditure and spending frenzies.
- To get out of your credit card debt or any other you must start and continue paying it. For this you will have to prioritize you debts and pay off starting from higher one or lower ones according to your choice, preferences and availability of cash each month.
- Find the best to reduce your debts. You may either do it by taking out a consolidation loan to convert all your debts into one or by negotiating with your creditors for debt settlement. However, you should read the debt settlement reviews as there may be a few hidden charges and clauses in it.
- Proper planning needs a proper budget of your finance according to your earnings. This will help you to cut your coat according to the cloth and keep you from spending ostensibly. You will be able to value your money and spend it with a reason so that you have effective control over your finance.
- Always have a recovery plan ready well before you indulge into debt. The recovery plan will keep you out of the vicious circle of debt. It does not need any specialized set of skills to make such a plan. The most orthodox and simple way to recover from debt accumulation is to plan for the future and create a saving for paying the installment amounts on time.
- If you know that you do not have to worry about making arrangements for money every month you will have the mental peace and energy to focus on your other jobs more efficiently. This will ensure a steady cash flow as well.
- Talk to professionals whenever you have to regard your financial wellness and to know the ways that will be more effective for a successful recovery from debt. There are several debt management agencies you will find in your locality or on the internet. The experts will tell you how to control and manage your finance and debts more effectively.
- Be more detail-oriented about your debt and know about the rates of interest that each of it carries, the date on or by which you need to pay the bill, the amount that you have already paid off and the amount outstanding. This will prevent you from taking any hit.
Always make sure that you consult with your creditors when you feel that you are in a stressful situation. Remember that it is your ability to repay your loan that primarily matters to your creditors but your willingness will also create a significant mark on the minds of your creditors. If they find that you are really in a dire situation but are still honest with your debt, chances are high that they will help you in your debt management venture.
The best way to start
When you want to talk to a creditor or number of creditors you will need to set the stage for negotiation. The best ways to do so is by making a lump sum payment upfront and then start the discussions. This way, the creditor will be able to see that you really want to pay off your debt and have already started to do it in your affordable way.
Proving your willingness to pay more than your affordability is the primary key for debt settlement. Also make sure that you make a commitment that you can keep and not fall back at a later stage.