If you are sick of being deep in debt, one way to get yourself out is through debt consolidation. But successful consolidation will still depend on how you handle your responsibilities.
In this article, we will talk about essential points which will lead you towards complete debt recovery:
Recognize the problem.
Some people tend to ignore or deny that they are drowning in debt. Yes there is such a thing as “good debt” but when people talk about having good debt. They are talking about having a mortgage loan on your credit report. You are paying off a debt that is a (hopefully) appreciating asset. If most of your debt is credit card debt, then you have a problem!
The first thing you should do is gather all your bills together. Analyze your debt. Which will also give you a good idea of how you are spending your money. You should ask yourself, why aren’t your bills going down? You have your monthly bills that will always stay the same. Such as:
- Rent / mortgage
- ESSENTIAL Utilities such as gas, electric water
- Car payment or bus / train tickets
Then you need to look at your unnecessary expenditures like:
- credit cards
- store cards
- furniture rental
- Cable bill
Last, look at your paycheck. Take a good look, that’s how much money you have to pay ALL your bills with. You need to create a budget based on how much you make. But if you can’t seem to make “ends meet” based on your pay, you need to start to cut some things out.
But that doesn’t solve your debt problem TODAY. That’s when contacting a debt consolidation company will come into play. They will be able to come up with an effective debt consolidation plan if you know exactly where you stand.
Remember, debt consolidation is only one step.
Debt consolidation is when you work with a company to obtain ONE loan to pay off all your debt. One thing to remember is that you only want to consolidate high interest debt. If you have some credit cards with a low interest rate, you don’t want to add those to your consolidation. Consolidating debts with a loan can instantly relieve you of stress in dealing with multiple creditors and enable you to reduce your monthly payments. Nevertheless, debt consolidation does not magically erase all your debts.
Plan your repayment.
The next step is to plan your repayment. Whatever debts you didn’t include in the debt consolidation loan need to be handled. Once you have consolidated those high interest debts you should have more money left out of your paycheck at the end of the month. This isn’t money for you to go out and have a good time. Its money you can use to pay down your other debts. Its up to you, not your consolidation counselor to handle these debts.
Make sure you set up all these debts on an automatic payment with your bank. You want to make sure you make at least the minimum amount. Your goal is to pay off these debts quickly too. So again make a list and start w/ the highest interest rate and go from there.
Adjust your lifestyle
Every cent you can save by spending less can contribute to debt repayment. Find sensible ways to cut down your monthly utilities. For example, you may give up your magazine subscriptions or subscribe to a lower cable or internet plan while working on debt consolidation. Many of our clients have actually cancelled their cable services and just gone with internet services. The cost of Netflix and Hulu is less than $20 a month and you can see most of the shows you watch on Hulu WHEN YOU WANT. So drop that $80 cable bill and put that money back into your budget!
Start shopping at second hand stores. You can find great bargains and even name brand items if you shop in the right place!
Tip: if you are going to shop at second hand stores, go to RICH neighborhoods! You will find really nice, gently used DESIGNER items. Reasonably priced.
Just keep in mind that all the sacrifices you make today will pay off big in the future! Not only will your credit improve, but so will your health once you our out from under the stress of debt.