Debt Plan

Debt Plan

Have a Get Out of Debt Emergency Plan

Heavy debt can make you feel as if you’re drowning. You may feel like an elephant is sitting on your chest preventing you from breathing, feel out of control and feel panic that keeps you from thinking clearly.

Until you formulate a plan for getting out of debt, you’ll keep floundering and the debt situation will only get worse. When you’re finally determined to rectify the situation by doing everything possible to get out of debt – it’s time to formulate a plan.

First, carefully assess your debts. You can request a free credit report each year from the three credit bureaus – TransUnion, Equifax and Experian. You’ll likely find that you’re even more in debt than you realize.

After you carefully analyze your situation, you can take a plan of action. If you’ve had some especially bad marks on your credit reports – such as charge offs – you may be able to negotiate with the creditor(s) or work with a debt counseling service.

Most people hate the word, “budget,” but that’s the next step in ensuring you get out of debt as soon as possible. Alter your lifestyle to exclude everything you’re spending money on that isn’t necessary.

Take your lunch rather than buying it every day, slash your cable and Internet services to the minimum, check car and other insurance programs to see if you can adjust your deductibles and lower your premiums, walk rather than working out at a gym and look at other monthly spending to see where you can cut out or lower payments and spending.

After you’ve tweaked your budget all you can, you likely have some extra money to pay on bills. If it’s not enough to stretch as far as it takes to pay all your bills, contact some of the businesses where you’ve accrued small bills to see if you can work out a plan.

Try to pay the bills which are regularly reported to credit bureaus. Make sure you pay your rent or mortgage first and then pay on the loans or credit cards which have the highest interest rates. Then pay the as much as possible on the remainder of your debts.

Stabilize your credit by doing things that will restore your credit score with credit bureaus. Establish a savings account with your bank and perhaps get a prepaid credit card.

These steps will show creditors that you’re serious about reestablishing your good credit and that you’re taking the necessary steps to repay your debts. Realize that you do have options and that filing for bankruptcy should be the last one you consider.

First Step for Getting Out of Debt – Develop a Budget

The first and most important step for getting – and staying – out of debt is to create a workable budget. Whether you use a spreadsheet or other form of tracking your spending, you’ll feel more empowered when it comes to your finances and can finally begin to save money for things you want and need when you know exactly where your money is going.

First, assess your net income – the money you bring home for expenses. Make sure you don’t use your total salary as your net income, but only what you get to spend after taxes and other deductions.

Your final take-home pay is the net income you’ll use when creating a workable budget. Next, track every penny of your spending for a month. This will be able to help you make adjustments in the way you spend money and identify where the problem areas are.

Some people are surprised where their money is going when they take a hard look at it. Set reachable goals – those that you want to accomplish that are both short and long term.

When you set short term goals, have in mind a year or less to get them paid. Long term goals may take years to accomplish. You can change your goals from time to time, but make sure you stick to a general plan of action.

You’ll want to know what your variable and fixed expenses are so you can accurately predict the amounts in your budget. Check out your past records for spending to predict your variable expenses.

The variable and fixed expense reports will give you a good idea of what you’ll be spending during the year ahead. Fixed expenses will likely be more accurate than variable ones such as clothing and unexpected medical expenses.

Take a hard look at the habits you’ve developed in the past and adjust them so that you’re not leaking money that could be used to pay off bills or other needed or wanted goals.

Look for cuts you can make to your spending and try adjusting the numbers in your budget so you can eventually accomplish your goals. Don’t work on a budget and then forget about it.

That’s the surest way to go back to your old spending habits. By keeping an itemized budget, you can easily look back to see how you’ve spent each dollar and adjust as you move on and pay off nagging bills.

Make sure you know your goals and consult your plans periodically as you would a map on a cross-country trip. One mistake many people make when formulating a budget is to cut out all of the fun in their lives.

But rather than cut out all restaurant meals, simply cut down on how many times you eat out as a family. Rather than taking your lunch to work every day, allocate one day a week to go out with friends. You are in control of your finances – make your money work for you.

Steps to Getting Out of Debt Forever

Many of us live in the moment when it comes to finances – if the money is there, or the credit is available, spend it or take advantage of it. If you truly want to get out of debt and remain out of debt, there are some steps you can take to make sure you avoid getting back in to the same old rut while you’re paying off present debt.

Always remember that when you put that great sale item you found on a credit card, you’re paying much more than it initially cost. Credit cards are so easy to use and it’s the easiest type of debt you can accrue.

It’s good to have them when really needed, but you have to learn how to use them wisely. The only reason you should ever use a credit card is convenience. Since you have an itemized list of everything you purchase through a credit card, you can better track your spending, plan a budget and have a better handle on record-keeping.

The trick is to religiously pay off the entire balance on the card every month. One alternative to racking up credit card debt is to get rid of the temptation of the line of credit and use prepaid cards or debit cards for your purchases and to help you track purchases.

Most banks offer debit cards and you can get overdraft protection, which keeps you from racking up enormous fees if you go over the amount you have in your account. Prepaid cards are offered from most major credit card companies and involve you securing the money in the account, then paying it down and re-depositing when the balance is low.

You have to create and follow a budget if you want to avoid staying in debt forever. A budget is a detailed plan about how you’re going to spend your money each month so that you can ensure that you won’t go over a certain amount.

Also, budget some of your money after bills and necessities for savings or investing. There are a number of handy software packages which will help you track each dime you spend.

You should plan to fund an emergency reserve which totals about six months’ worth of earnings. Then, make sure you withdraw money from the account only in case of an emergency or unforeseen medical expense.

There are also other means to get out of debt – including bankruptcy and credit or debt counseling services, but make sure you choose one that is non-profit rather than for-profit to learn how to resolve current debt and keep from getting back into debt in the future.