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Debt Management and Credit Cards Budgeting for Debt Management
Of course, the earlier you make a financial plan (think budget), the better and easier life will be. However, if you have been conducting your financial life without a plan and find yourself in a real financial bind, it isn't too late to make a budget now.
If each payday, you are only paying the creditors who are screaming the loudest, you need a plan, my friend.
There are many sites on the Internet that have forms that guide you through the budget-making process. Choose one that looks like it could work for you.
The first thing to do as you follow the instructions for making a budget is to list the bills that are for the necessities of life....food, shelter, utilities, transportation, and clothing. These expenses are not optional. After you figure out how much just covering life essentials comes to each month, the remainder is what you have for paying other bills. This is what we call disposable income.
If the total of your disposable income is less than the minimum payments that you are being required to make each month on your secured and unsecured debts, then you are going to need to make some changes and maybe get some help.
The first thing that you can do is contact all of your creditors yourself and try to make arrangements for paying them in a time frame that you can live with. But there are other options.
One option is to contact a debt management company. These companies can help with your unsecured debts (credit cards). There are both paid for and free debt management services available.
Another option is a consolidation loan. This is almost always in the form of a second mortgage, but it could be the answer that you are looking for.
A third option is a debt negotiation company that can negotiate with your creditors for you and get settlements of debts for greatly reduced amounts.
See Also:
Surviving Debt Management Do-Overs
| Debt Management Experts Debt Management and Home Equity Loans
Most consolidation loans are second mortgages, and second mortgages are home equity loans. When you buy a home, you usually make a fairly substantial down payment, so you start out with some equity in the home.
As the years go by and you make your monthly mortgage payments, you increase the equity that you have in the home; and when property values increase, your equity in the home increases. The equity that you have in your home represents the portion of the value of the home that actually belongs to you.
Many times when people find themselves in a financial bind, debt collectors calling and coming by, and the mailbox full of second, third, and final notices, they will look at the equity that they have accumulated in their homes and see it as a possible way out of a financial crisis. It is a possibility, of course, but it is one that needs to be well thought out before it is applied.
There are two kinds of debt. There is secured debt, which includes anything for which there is collateral. Your car is the collateral for the loan that you made to buy your car. Your house is the collateral that you used to buy your house. Your guitar and amplifier are the collateral that you used to get the loan to buy them. If you dont pay your secured loans, the lending institution can repossess the collateral that you used.
Unsecured debt is the other kind of debt. This is credit card debt. We are talking about all kinds of credit card debt. The store credit card that you used to buy your television set is unsecured debt. The television is not collateral for that loan. If you don't pay that loan, they will not repossess your television set. They can sue you for payment -- they probably won't, but they could.
When you make a second mortgage or consolidation loan, you are making all of your unsecured debt secured debt. You are using your house as the collateral. If you don't pay your second mortgage, your mortgage can be foreclosed upon and your house can be taken. |
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Debt Management - Getting the Priorities Straight
| Debt Management Makes a Comeback Debt Management Makes a Comeback
Not really! It would be nice, of course, if everybody suddenly became excellent debt managers and such nasty little things as late notices and harassing phone calls by bill collectors became things of the past.
If everybody only took on debts that they could pay on time and in full each and every month, the debt management companies and the consolidation loan companies could just fold their tents and slip away into the night. That hasn't happened, and there isn't any indication that it
is going to happen in the near (or far) future.
More and more people are finding themselves in financial holes more and more often today. When discussing this situation with a group of my peers, the consensus was that instant gratification and less than adequate financial education are the two principal causes.
In days gone by, parents taught their children about financial responsibility. Children were given small allowances and then instructed how to spend it. They were required to save 10%, give 10% to charity, and to make sure they had enough to cover their necessities until allowance day came around again. If the kids ran short, they were not allowed to dip into their savings. They simply did without until allowance day. Mom and dad did not pony up to cover the shortfall if junior had blown his allowance on ice cream.
There was no such thing as instant gratification. If a kid wanted a bicycle, he had to save for it. It didn't just appear because he begged mom and dad for it.
It really is time for parents to again begin teaching children about financial responsibility and debt management, and the schools need to do their part as well. We have become a nation of borrowers without a plan to repay our debts. |
Related Topics: Planning for Debt Management,
Debt Management Makes a Comeback, Debt Management and Consumer Counseling
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