| Debts And Bills |
| By Credit Federal |
Published
07/22/2008
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Debt Consolidation
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Helpful Tips For Managing Debts And Bills
Whether you suffered a loss of income, encountered unexpected emergency expenses, or if you simply borrowed too many loans or over charged on credit cards, take immediate steps to pay off debts.
The title credit 'counselor' is an apt term, considering how stressful high debt can be. Consider a professional, nonprofit credit counseling agency to help you with your debt recovery plan. They can help you identify unnecessary bills (wasteful expenses).
Once you've identified all your bills, add up your income and setup your personal budget. You can download our free checkbook register as a way to automatically add up and track expenses, or one of our other personal finance calculators.
Now that you know how much you owe and how much you earn (and after you've cutout wasteful expenses), establish your debt repayment plan.
Tip 1: Budget more than minimum credit card payments. Although paying the minimum is better than nothing, you wind up paying a lot more in interest over the long term.
Tip 2: Start saving and setup an emergency loan fund to cover at least three months of expenses. With an emergency fund, if you get laid off, miss work due to illness or injury, or have unexpected expenses, you'll have a financial safety net.
Use your budget to help plan your debt reduction strategy. List all of your debts, from the highest interest rate to the lowest, and focus on paying off the highest rate balances while making timely minimum payments on the others (this strategy is called the 'Highest Interest' method).
(Note: Another debt reduction strategy is called the 'Debt Snowball' method. With the debt snowball method, you would focus on paying off your smallest debt first while making minimum payments on the rest. Which method is best? The highest interest method gets the debts paid slightly quicker, which means you would pay less in overall interest, but it may not provide gratification as fast.)
Tip 1: If you have the money in savings, pay off what you can. The amount of savings income is usually less than the interest rates of debts.
Tip 2: Use any extra cash, such as annual bonuses, lottery winnings, yard sale cash, rebates, credit card rewards, etc, to payoff debts.
Tip 3: Volunteer to work overtime or get a second job.
If you're unable to earn more income or generate additional revenue, you'll need to slash your expenses.
Tip 1: How to reduce debt
Tip 2: Cut expenses from personal budget
Tip 3: Household expenses personal budget software
Debt consolidation & credit card balance transfer tips:
Tip 1: Consider a debt consolidation loan to payoff debt only if you have the discipline to not use your credit cards and rack up more debt charges.
Tip 2: Don't borrow from your 401(k).
Tip 3: Forego credit repair clinics that may charge hundreds of dollars to fix your credit record. They cannot do what you can do yourself. Read our free credit repair tips.
Tip 4: Don't buy a house you cannot afford. Although you'll be getting more from your money than by paying rent, paying a costly mortgage could impact other expenses like medical coverage, college savings, a more reliable car, etc.
Tip 5: If you get a balance transfer credit card and transfer debt, you may want to cut up the old credit card so you won't be tempted to run up charges on it again. Note: Closing a credit card account could lower your credit score, so simply stop using the card instead of cancelling it.
As you payoff bills and get out of debt, don't fall back into old borrowing and charging habits.
Tip 1: Stop charging if you cannot payoff balances in full each month.
Tip 2: To reduce temptation, cut up all but one credit card; the one with the lowest interest rate, and use it only for emergencies.
Tip 3: Order your free credit reports annually, check and fix errors.
Tip 4: Ask your your creditors for lower interest rates. Read our tips on how to negotiate lower credit card interest rates.
Tip 5: Ignore retail store charge card offers, because the discounts they offer are often outweighed by the fees and interest rates they charge you.
Are debt collection agencies harassing you? Read our advice on how to deal with debt collection agency harassment. Rights:
Tip 1: Debt collector harassment, oppression or abuse is illegal.
Tip 2: They cannot falsely imply that they are government representatives or that you have committed a crime.
Tip 3: They cannot tell you that you will be arrested if you do not pay.
Tip 4: Never give up. You didn't get into debt overnight and you won't get out that quickly. Getting out of debt takes time, effort and patience.
Get additional help and assistance with our debt relief resources and desktop, free personal finance software such as our checkbook register software to track expenses.
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