Being in debt is not necessarily a bad thing, in fact it can be quite a good solution get the house you want or help your kids go to school. It only becomes a problem when you lose control of the amount you spend and the money you borrow. If your debt is more than the amount of money you earn in a month, then that is a given sign that you will soon be in deep debt trouble if you don’t do something about it. Below is a simple step by step plan to help you reduce debt before you get in too much trouble that you’re only recourse will be to file bankruptcy.
If you know that your debts are already getting out of hand the very first and logical step that you will have to do is to basically reduce the amount of money you will spend. This means cutting back on your usual luxuries and to give more priority to your most important expenses such as your monthly bills, food, rent, and the like. It is a good idea to list down your usual expenses in a month and categorize them based on whether you can or cannot live without them. By doing so, you will have more money to pay off your existing debts and may be have some extra that can go into your savings.
The next step that you will have to do is to restructure your existing debts. This is the part wherein you will have to create a plan on how you can lower your interest rates and which debt you will have to pay off first. You can create a list of all your debts together with their interest rates. You can either try to negotiate with your creditors to lower your interest rates or to waive certain fees which you may have accumulated. You can also try to avail of a loan which has a considerably lower interest rate and pay off all your other debts with it. By doing so, you are also reducing the amount of money you will be paying in a month. If you are considering to get a new loan to pay off your other loans make sure that you have planned it correctly and make sure that you have enough money to pay off the monthly dues.
Final step is to try to take a look at your assets; look for a way where you can cut down or reduce. Take for example if you have just bought an expensive appliance for your house which is not exactly necessary, you can sell it and use the money to pay off your loans. Or your house is becoming too costly, you may also consider moving to a smaller and less expensive house. Basically, anything which you can do very well without, you can try to sell it and use the money to help you pay off all of your debts.
If your debts are still getting out of hand amidst following these steps, then you may want to consider signing up for various debt reduction programs. Upon signing up for these programs, you will have debt specialist help you to attain the financial freedom which you have long been aiming for.