Dealing with the debt timebomb
Photo by: pingnews.com
This is a guest post by Jonathan who created Friends and Money in March 2007. His site is dedicated to providing reviews of paid survey, social networking, and cash back shopping communities. His aim is encourage visitors to combine the twin goals of making friends and earning money online.
Debt is an increasingly problematic factor in our day to day lifestyles, especially as consumer borrowing has become the norm, rather than the exception. Having worked closely with individuals at all levels of society with debt related issues, no one is exempt from the problem. Debt is an inevitable factor in our lives and at some point we will all need to make use of credit cards, loans and mortgages to get through life and on their own these are not always bad things. The issues start to occur when we impulsively incur debt without thinking through the consequences of our actions or considering our capacity to pay it back in the long term.
As a Christian I believe that I have a responsibility to ensure that I make a considered opinion before taking on debt so that others aren’t negatively effected by my inability to repay in the future. I’ve put together a few thoughts about dealing with personal debt issues.
Acknowledge the Problem
The first step to addressing debt related issues is always to acknowledge that there is a problem. Denial is one of the major causes of a debt situation getting worse. It’s understandable though, given that none of us like to acknowledge that we have lost control of our financial circumstances, not least because we fear what others might think of us, especially those closest to us. So you need to ask yourself a few honest questions to assess whether you have a debt related problem:
- Do I try to hide information, bills or finances from those closest to me?
- Am I always borrowing money from others to help me through until my next pay check?
- Am I constantly living beyond my means?
Accountability is key if you are keen to address your debt related difficulties. Depending upon your level of debt, accountability might take the form of discussing the problem with someone close to you or seeking professional help from an independent and reputable debt counseling organization.
Not everyone needs professional help, but talking through your problems with someone close to you is important so that they can help you to put structures in place to help you tackle the problem.
With the advent of the internet and the rise of blogging, some people have taken to creating debt related blogs to share their personal experiences of debt as a means of being accountable for their actions and doing something about changing their circumstances. I have absolute admiration for them in doing this.
Here are some great blogs that have taken this particular route and they are an inspiration to us all:
Be Cautious Of Debt Consolidation Companies
Most debt consolidation companies work on the principle that they can reduce your monthly outgoings by combining your debt into one large amount, usually with one company which you then pay a reduced monthly payment on. The theory behind debt consolidation is excellent but its execution can sometimes be dubious.
It is never a good idea to sign up with a debt consolidation organization online and without any previous knowledge of their reputation. You should research any such organization and preferably seek professional guidance from a reputable debt counselor who is likely to have a good resource list of reputable debt consolidation organizations.
Often you can consolidate your debts yourself simply by contacting each of the organizations or companies with which you have debts, explaining your circumstances and attempting to renegotiate payments. Increasingly if a company believes that they will receive some form of payment from you rather than none at all they are usually willing to negotiate, although this isn’t always the case.
Deal with most immediate debt first
Sometimes it is easy to just ignore the problem but debt issues don’t go away without your intervention and they only get worse unless you take action. If the thought of the size of your total debt is too much to cope with, then try to break down your debts according to size and how immediate the next payment is.
Whilst the general rule is always to tackle those debts that are charging you the most interest, first, sometimes it helps you to feel that you are making progress if you can pay off a number of smaller debts first. This can help you gain control of your finances again and help you to feel positive about the future.
Avoid Interest Free Credit Card Offers
Sometimes it is very tempting to pay off your debt with another debt. Interest free balance transfers available through credit card companies look great in the short term for three to six months but don’t be fooled. Firstly the interest free element only applies to any current balance you transfer and any new transactions you make will be charged at the credit card company’s standard Annual Percentage Rate.
Secondly the Annual Percentage Rate that you will be charged after your period of free interest is usually much higher, so check out what that rate will be.
Creating a budget is perhaps one of the most simple and yet neglected aspects of our personal finances and yet it can help you plan how you will spend you money and identify problematic spending areas in your life. So that it doesn’t become a chore, why not sit down with the whole family and work through a budget together. Research shows that debt problems rarely affect just one person, but often affect whole family. But if you encourage you family and the kids to take ownership of their own spending, then you are more likely to be successful in climbing out of your debt problems.
Remember that you are never alone and that there is always someone available to talk through a debt problem no matter how hard it may seem. Often we seek to protect those we love from financial hardship but they are also often the most accepting and willing to help when the going gets tough.
From Glblguy: Thanks Jonathan for the great article. If you would like to featured in a Saturday guest post here on Gather Little by Little than contact me. I’m always looking for new guest posts to feature!