The financial world has made it so easy for us to gain access to loans, mortgages and financing that we find ourselves in huge amount of debts. This in turn forces us to ensure we have an income to pay for these debts. Plus, debts leave us with little or no money in our bank account as one of the main reasons is the high interest we pay. We cannot save, meet monthly payments or even plan for a vacation.
Debts put us in a tight spot with no breathing space or time to really enjoy life. It’s hard to break free from a debt as we are committed to paying back what we owe. However, if we pay back quickly, it will allow us to live life more freely.
There are many ways to solve debts:
1. Overcoming debt struggles
We can overcome the struggles of debt, bankruptcy or financial stress by seeking professional advice. There are credit counsellors that can be help us remove this debt anxiety. They can help with financial management and budgeting, and even offer financial knowledge.
2. Benefits from being debt-free
There are many benefits to reducing debt apart from reducing stress and anxiety which include increasing financial confidence, improving relationships and family well-being, allowing us to focus on other goals and contributing more towards a retirement savings. There is nothing wrong or embarrassing about debts, but if not controlled can get out of hand and put us through unnecessary worry.
By combining all our small debts into one, we can systematically pay off this one debt and lower our monthly payments. The best way for debt relief and debt management according to the interest rate and that will determine which ones to consolidate so we are not paying a high interest rate.
4. Budget review
Prepare a budget to see where we spend money on a daily basis. Apart from daily expenses, list down all the debts that are being paid such as car loans, credit cards, mortgages, outstanding bills etc. This will help to understand how much money we get, spend and save. It will also help to balance income against expenses and prepare a roadmap on how to reach our financial goals.
5. Payment plan
After determining our budget, we can prepare a plan which will keep us focused on the payments within a workable timeframe, while not limiting our financial position. A timeframe that is too short may make payments difficult, while a timeframe too long will not relieve us from the debt and we pay more money on interest rates. We need to choose a timeframe that will relieve us from the debt sooner and at the same time limit the interest we pay.
6. Stop accumulating debts
There is the tendency to continue to spend even with a mortgage, car loan and credit card, we choose to take a credit line. We need to plan diligently when considering financial support. We should avoid using the credit card if we cannot afford and use it only if we can pay back as quickly as possible.
7. Monitor our plans
Monitoring and cutting back on expenses will surely get us to our financial goals.
8. Seek counselling
When we have a person or organization encouraging us to clear our debts, it is bound to happen sooner than later. The counselling agency assesses our financial situation and capabilities, prepares a plan and monitors it for us, as well as negotiates lower interests where possible. This way we cannot side track or even consider new loan options.
It is so easy to accumulate debts but way more difficult to be free from debts. But the scary aspect is that debts can eventually result in bankruptcy. Professional counselling can help us prepare a realistic personal budget to regain control of our finances.