By Charles Malcolm
Let me begin with something amazing, which may startle you.
“Debts are actually a useful tool if it is used wisely – to acquire assets.”. If your consumer debt is taking a large share of your income then it is really a matter of concern. The debts and the associated rates of interest are really a big blow to your personal finances.
If debts rise to a higher point, then melting them down can be tougher. Here are some suggestions, which you can use to implement your financial escalations and melt them down to take a control of your funds.
Tip 1: Why don’t you develop a comprehensive picture of your debts, loans, credit cards, and their facts?
Yes, in the beginning, you have to assess how secure you are. You have to make out what is the difference between the highest and the lowest balances. You have to choose which service is more flexible. You have to make out a complete picture of your debts before you start conversing with your creditors about the lowering of interest rates and payment schedules.
Tip 2: Keep those plastic-made credit cards far away
You need to stop carrying the credit cards and place them in a safe deposit box or at places, which is almost impossible to reach. We know that you do not like to mince them up with a cutter as it may have a negative impact on your credit card. You have to preserve some of them for emergencies. If you use it for an emergency then try to pay off the balance within a period of 30 to 60 days. Do not make any impulse purchase.
Tip 3: Call up the banks or the creditors who have lent the money and ask to lower the interest rates
Creditors are willing to work with you. If you are in a financial problem go on for the negotiation with them. They are eager enough to ease your payments rather than risk your default on your loans. The bank or the creditor also has special programs to prevent mortgage defaults for which you may be almost eligible.
Tip 4: Make a calculation of the debt-to-income ratio
Debts are with you for a longer time, then you have to make out which is the one that you want to get rid of almost as quickly as possible. Decide how much you actually need to reduce the debts on car notes, and credit cards so that the positive cash flow is restored once more.
Tip 5: Keep a record of your financial accounts
An easy-to-use simple check register type accounting program helps to pull up the statement of the financial position to help you in making your path smoother and make you debt free. In the beginning, the reports may look discouraging, but as soon as move ahead, you will look forward to charting your success at reducing the debts.
Tip 6: You have to assess the steps to reduce the debts based on the information collected
You have to calculate the payment modes, timelines, and dates for clearing out the bigger element of the debts. When you finally pay off the last non-essential debt, your positive cash begins once more.
Tip 7: W4 form must be checked regularly
If you are getting a large refund check from your IRS every year, then you are taking too much out in withholding. Reduction in the withholding may give you some extra cash to blow out your debts. The saving on the interest alone cannot make up for the annual tax check. So clear those credit card payments as soon as possible.
Tip 8: You need to increase the minimum payments on your credit cards
The larger your payments, the faster the debt reduction. The minimum payments actually service the interest without reducing the principal amount.
Tip 9: Stop eating out
Yes, this is the most essential part, which you have to adopt to reduce your debts as fast as you can cut down on your expenses. Lessen the subscriptions, quit smoking, turn off the lights, control the thermostats, and do not take your coffee in Starbucks or Café Nero. Do not go out to dine or watch a movie often, as they are expensive and the credit card bills may hurt the credit score.
Tip 10: Start borrowing from yourself
If you have a retirement plan or a 401 (k) plan or maybe an insurance policy, then take a loan because of them and pay off the credit card debts. Secured loans against policies or retirement plans are much better than credit cards.
If you cannot fight back the debt in spite of following all the tips discussed here, then you have to switch to the last resort and that is bankruptcy.
Have a disciplined and worked-out plan to fight back the debts faster and quicker. This year you should adopt these few steps to get control of your financial position.
Charles Malcolm is a financial advisor who works with eminent outsourcing companies and acts as their financial guide. He is presently with BPO outsourcing companies Canada.
