After the recent economic meltdown, a large number of consumers have incurred overwhelming debt. In this situation, they look for options to eliminate their financial woes. Most of the people manage and try to eliminate their own financial burden. Well, others who fail to do it on their own take help of a debt relief company. If you’re cautious while managing your personal finance, then you can avoid incurring insurmountable amount of debt. Well, financial expert defines personal finance as application of the principles of finance to the monetary decisions. It is essentially meant to address the ways in which you can design your budget, use your savings to pay off your debts and avoid getting into the trap of debt in future. You may find various components when your plan to manage your personal finance like checking and savings account, insurance policies, social security benefits, retirement plans and credit card or other liabilities.
Here are five steps to eliminate your debts and regain control over your financial situation:
- Design a pragmatic budget plan: The first step to regain control over your financial situation is to prepare a pragmatic budget plan. Budgeting can track your financial state and help you understand where and on what you’re spending your money. It can be easier to track your income and expenses through this plan. A realistic budget plan can help you avoid dissuading from your budget plan. When you track your budget you can avert splurging your hard earned money on unnecessary things. Therefore, you may be left with more money at the end of the month. You can increase your savings and use it for paying off your debts.
- Debt repayment plan: When you’re working on paying off your debts on your own, you’ve two common debt reduction options like debt consolidation and debt settlement.
- Debt Consolidation: It is a process where you merge your multiple bills into a single monthly payment. You can combine your high interest debts into single monthly payment. When you consolidate your debts, you can actually lower your monthly payment with ease. There are two ways to consolidate your debts: you can take out a secured consolidation loan or transfer your high interest debts into a low interest rate card.
- Debt Settlement: In this process you pay less than you actually owe to the creditors. You’re required to negotiate with the creditors to lower the outstanding balance to make the owed amount affordable to pay off. You can pay off the owed amount in lump sum or in installment.
- Avoid the use of cards: Make sure you avoid the use of cards when you’re working on paying off your debts. The cards may tempt you to spend more than your means. Therefore, increase the use of cash over cards if you’re planning to come out from the debt rut.
- Know your consumer right: If you’re aware of the consumer rights, then you can avoid harassing calls from the consumers. The Federal Trade Commission has implemented Fair Debt Collection Practice (FDCP) Act. If you’re aware of this act, then you can be aware of the tricks to tackle the rogue creditors.
- Keep a track of your credit report: When you settle your debts, the creditors may report your account to the credit bureau as “settled”. This may have a negative impact on your credit report. Therefore, negotiate with the creditors to report the account as “paid in full.” This can help you avoid blemishing your credit report.
Therefore, you’re required to keep the above mentioned points in mind when you plan to eliminate your financial woes. Once you eradicate your debts, you can regain control over your financial situation.