Debt creates more financial problems than anything else. In fact, you could say that it is the financial problem. People don’t know how to live with what they have, so they borrow money until they are so far in debt that they can’t see a way out. So how can you solve your debt problem? Here are a few tips to get you started.
Control Credit Cards
Credit cards are the easiest way to spend money that you don’t have. With a swipe of this piece of plastic, you can get whatever you want, even if you are going to pay for it later in more than one way. To avoid racking up excessive debt, learn to control your credit card use. Limit the number of times that you use your card in a week and pay it off in full every month. If you avoid letting the balance build up, you won’t get to a point where you can’t pay it or where you are paying more in interest than you originally paid for whatever you bought.
For one month, write down every time you spend money, how much you spend, and what you bought. It’s important that you do this for everything you spend money on. Many people will track larger purchases but ignore the smaller things. But the small things add up and you may find you spend more money on little things over the course of a month than you do on the big things. Not only will this help you see how much money you are spending, but it will also make you think twice about spending money since you know you have to write it down after.
Create a Budget
Once you have a basic idea of how much you spend in a month, use that to create your budget. Start with your fixed expenses, like your rent or mortgage, any bills, and insurance. Once you have those budgeted, you can use your monthly expense record to divide up the rest of your money. Make sure that you set some money aside for your savings and that you set aside enough money for each category. You may need to adjust your budget over the next few months so that you can find the perfect balance.
If you are already dealing with debt, be proactive in getting out of debt. The actions you take will depend on how much you owe and how desperate your situation. If you only have a little debt, create a plan to get out as fast as possible. If you have a lot of debt and you are behind on payments, to the point where you are fielding collection calls, or you are about to lose your home, it might be time to consider bankruptcy. Bankruptcy gets a bad rap and you definitely don’t want to deal with it if you can avoid it, but it can help you out a sticky situation. Chapter 13 bankruptcy can help you set a plan to repay some of your debts and discharge others. Before you decide to declare bankruptcy, talk to a financial advisor.
Dealing with debt isn’t easy, especially if you have been in debt for a long time. Make sure you start now to get ahead on your financial habits and to set up a better future for you and your family.