Knowing how serious your financial problems are is the first step toward attacking debt. Your income and other personal financial circumstances along with the amount of debt you carry will determine whether you have a small or a large problem managing what you owe, and more importantly paying it off never to return.
For example, if you make 0,000 per year and have ,000 in unsecured credit card debt, that might be considered a minor problem.
However, if you make minimum wage and have the same ,000 in credit card debt, that can be a major crisis.
Before you seek debt help, you should assess your personal financial situation. Start by determining your monthly take-home pay and any other sources of regular income. Next create a list of all monthly expenses such as your mortgage payment, utilities, transportation charges, food, clothing and other miscellaneous expenses. Be sure to include the amount you pay each month in credit card bills.
After doing the preliminary analysis, you will be able to make an intelligent assessment of your financial status and be able to proceed with a good plan for your future.
If you make more money each month than you must pay out in bills, you are well on your way to improving your debt problems. If your income does not cover all of your expenses, it may require additional action to get your finances under control.
What is Considered Too Much Debt?
Debt is never a great thing, but, there is some debt that is better than other debt. Most people have a mortgage and owe quite a bit of money on their home. If you have a car loan, that is another form of debt that is manageable.
Having unsecured debt in the form of credit cards, is perhaps the worst form of debt. Not only does most credit card debt come with high interest rates, but if you only pay the minimum amounts, you can be saddled with the debt for years.
By the time you pay off the debt, you probably will no longer have any of the things you charged to accumulate the debt. In essence, large balances on your credit cards is a huge financial burden that should be avoided if, at all, possible. Too much unsecured debt is debt that you can not pay off within a few months.
3 Top Reasons We Get Into Debt
1. We Want it now Somewhere in the last 40 or 50 years, our society went from a save now and spend later culture to a get now and pay later culture. With the advent of credit card companies a relatively recent occurrence, intense advertising and marketing campaigns encouraged Americans to be extremely materialistic. Instead of saving for a big purchase, we simply put it on a credit card so we could enjoy the benefits before we could really afford the item.
2. Loss of Income When you first get a credit card, you make a promise to be responsible and pay your bills on time. That works fine as long as you have a job and enough income. If you become unemployed or do not have enough money to pay all of your bills, you make up the difference by charging groceries and other non-durable items. Before you know it, you are at the limit for your credit cards.
3. Medical Issues If you get sick or have a major medical problem, you could be out of work for some time. You may become disabled and no longer be able to work. Your bills do not go away and the credit card becomes a source of income. If you do not have adequate insurance, you can rack-up huge debt that may be impossible to repay.
Debt Management and Loans For Consolidation
There are many reputable financial companies that offer debt help. You can get debt help in the form of a consolidation loan. A consolidation loan allows you to combine all of your unsecured debt into a single amount and then make one monthly payment that will reduce the amount of the total balance.
In addition to helping to arrange a consolidation loan, a Debt Management Company can offer some strategies for attacking unsecured debt.
5 Strategies for Attacking Unsecured Debts
1.Pay off your highest interest rate credit cards first
2.Put all of your credit cards in a drawer and do not use them again.
3.Call your creditors and try to negotiate a better interest rate
4.Cut back on extras and use the money to pay down debt.
5.Get a second job and apply extra earnings toward reducing your debt.
Remember, if you have an overwhelming amount of debt, there is always a solution available. You can seek help by going to a company that specializes in debt relief or debt consolidation or you can try to attack the problem on your own. Just as you probably did not get into trouble in a few months or a few years, it will take you time to get back on your feet. It is time well spent, trust me in that much at least.
Finally, if there is no possible way to repay the debt, you may chose to consult an attorney and consider filing Chapter 7 or Chapter 11 Bankruptcy.
In America, everyone gets a second chance to recover from being deep in debt.
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