If you are heavily in debt, it can feel like there’s a huge monster standing outside your door just ready to pounce on you. I understand that it’s not easy to deal with a large amount of debt but there are some things you can do that will help.
Start a budget
First, if you haven’t made a budget you need to. There’s just no way to get control of your spending unless you know how much you’re spending on which items. You should start making a list of everything you spend every day–right down to that dollar $0.99 energy drink. Sit down at the end of the month and take a look at how you have been spending your money. You may be shocked. But you will at least be able to see why you’re in debt.
What can you cut by 10% or more?
Next, look at each item with an eye as to how you can cut it by at least 10 percent or eliminate it entirely. You might be surprised at the items you can do without if you just put your mind to. For example, maybe you don’t need to eat out four times a month or go to three movies. Do you go out for lunch? Instead of this, why not take a $0.90 Michelina’s Entrée and a low-fat yogurt to work with you several times a week? This alone could save you as much as $12-$15 a week.
Dealing With Debt
You might also ask a friend or family member for help. There are some people who are just wizards at managing their finances and keeping their debt under control. If you have a friend who is an accountant or CPA, she or he could be a good source for information about budgeting and paying down your debt.
Find a consumer credit counseling agency
If you are not fortunate enough to have a friend or relative who is a money wizard, you could probably go to one of the consumer credit counseling services in your area. Most of these agencies are nonprofits and some will even help you free.
Before you sign up with any of the services, make sure that it’s reputable. There are some for-profit agencies that will charge you high fees or even fail to make payments to your creditors on time. In fact, some credit counseling agencies have been found to be outright scams–keeping your money and using it for themselves, rather than sending it to your creditors. There are two credit-counseling organizations, the Association of Independent Consumer Credit Counseling Agencies (AICCA) and the National Foundation of Credit Counseling (NFCC). Don’t pick a credit counseling service before checking with one of these organizations to make sure it’s totally trustworthy.
Get a better payment plan
If you decide to work with one of the agencies, you will be assigned a counselor who will sit with you, go over your finances and debts, and help you prepare a plan for getting your finances under control and paying your debtors. In some cases, the agency will negotiate with your creditors to get you better interest rates and a more favorable payment plan. In this case, you will probably send one check a month to the credit counseling service, which will then distribute the funds to your debtors based on the payment plan to which they agreed.