Stay Out Of Debt

Category: Finance, Credit.

Credit card debt can pile up quickly and be overwhelming to the average individual who has difficulty controlling daily spending habits.

When such a situation occurs it is critical that steps be taken immediately to stop using credit cards for purchases and to start on a debt reduction plan. Unable to keep up with the required payments to one credit card company, these same individuals accept credit balances with several companies, opening up too many possibilities for spending and starting a downward debt spiral they are unable to recover from financially. In any case, there are a number of alternatives for getting the debt under control. The below are 5 helpful hints that any debt plagued consumer can immediately implement to correct their current financial situation for the better, either through their own actions or through the assistance of a professional debt management company or credit counselor: A written plan. Most of these choices fall under the umbrella terms of debt management and/ or credit counseling. The best credit counseling or debt management firms will take as much time as necessary to review each individual consumer debt situation.

At no time should the management or counseling professional make unrealistic promises about clearing up credit card debt problems. The first product of this detailed review should be a written plan, tailored to one person's financial situation or one family's financial situation. A good plan has dedicated benchmarks for repayment of your debt to creditors in manageable amounts you can afford without financial hardship. This may seem to be exactly the opposite of good advice, until the idea is looked at a bit more closely. Avoid paying only the minimum. Most experienced debt management professionals and counselors will quickly explain that the minimum payment usually covers only the interest charges. If the credit card balance is$ 5, 000 and minimum payments are made over the course of a year or two, the cost of the$ 5, 000 items has increased by a couple of thousand dollars.

This leaves the principal( the actual amount of purchases on the card) . That is generally good for the credit card company and bad for the customer, for obvious reasons. This method of working through debt can come in at least a couple of different forms. Consolidate your debt. Consolidation can be something as simple as keeping one credit card( the one with the best terms/ rates) and destroying the rest. Debt consolidation can also involve getting a bank or credit union loan that has a low interest rate.

Using the remaining card only in emergencies is probably the best path from that point on. The proceeds can then be used to pay off higher- interest credit card debt. In a very basic sense, it does not make good financial sense to have money in a savings account earning 2 percent or 3 percent while carrying a credit card debt with 17 or 18 percent interest. Use savings to reduce credit card debt. Of course, it is good to have that" nest egg" for unforeseen situations or special occasions, but there may be a time when it is advisable to use this savings to reduce credit card debt. Stay out of debt.

If you have to choose between saving for that future boat you have always wanted or getting yourself out of a current financial credit bind, you need to be choosing the later without hesitation. The only way to ensure you stay debt- free in the first place is to change individual habits and your family's lifestyle. Simply writing down, the family income, side by side and the family expenses is an excellent starting point. Many families have no budget at all, not even a few brief notes about what to spend on house payments or rent, utilities and groceries. Making sure that everyone sticks to the budget is the next, and most critical step. In many cases, this additional money only leads to more debt. Many individuals and families focus on getting more" pay" or having more" income" rather than reducing costs and cutting out unnecessary expenditures in the first place.

A simple change in your everyday financial thinking can lead to a drastic change( for the better) in your overall financial situation. The situation is not hopeless. Follow the simple five helpful hints above and start walking the path to a debt- free life today. You can do it, just put off that boat purchase a couple more years, your credit score will thank you.