Managing Your Debt – 3 Simple Steps
Managing your debt is far easier than you think – let us show you how.
Step One – Acknowledge the true state of your finances
Many people think that if they are maintaining their minimum monthly payments and their home and vehicle, they are in good shape. The challenge is that most minimum payments on credit cards are set so low that you barely even cover interest, meaning that you would have to pay substantially more to see the smallest reduction in your principal balances. The first step to managing your debt is taking an honest look at your financial profile.
Take a look at your income, expenses, assets and liabilities. Ask yourself these questions:
- Are you heavily reliant on another income earner to make your personal bill payments?
- Are you only managing to make minimum payments to credit?
- Do you have very high interest credit, such as payday loans and store cards?
- Do you find it difficult to make your housing and utility payments on time?
- Do you have money left over for savings once your bills are paid?
- Are your credit cards near, at, or over their limit, and have been for some time?
Facing debt can be scary, but acknowledge there may be a problem is your first step to fixing it.
Step Two – Make firm decisions
If you have determined that yes, you are ‘just’ making ends meet, it may be time to get some financial counselling. Buyer beware – in the debt arena there are many different types of professionals who claim to offer debt services. This can sometimes present a conflict of interest but more often can lead to worse problems in the future. To make firm decisions you need firm advice. Look for a financial professional who:
- Is accredited/regulated by a government entity – this will ensure that there is recourse should a situation arise.
- Does not request upfront fees.
- Presents no conflicts of interest – is their service is the only solution to your problem?
- Has authority/power to implement the recommended courses of action.
- Has a strong name/brand that you have heard and an online presence you can trust (recommendations, blogs, thought leadership, etc.).
Once you have chosen someone to impartially review your finances with you, this may mean that you need to make some tough decisions. Managing your debt means making more than minimum payments, cutting down the amount of debt, and developing a strict budget in order to find room to do so.
Step Three – Execute plan and rebuild
After taking a good hard look at your credit and finances and coming up with a plan to reboot those finances, it is time to execute. Executing this plan to deal with debt means that it is time to:
- Create and move forward on a budget.
- Become less reliant on credit.
- Look at ways to repair damaged credit.
- Make a commitment to yourself to never see your debt get out of control again!
If you would like to learn more about managing your debt, click here to read up on our firm or click here to schedule a free consultation and find out how we can help!
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