Don’t Rush into Debt Consolidation. Try a Self Repayment Plan First
Debt Consolidation is often what most people cry out when their finances get out of control or become unaffordable, but although debt consolidation, and debt consolidation loans in particular are a wonderful financial tool, too many people rush into arranging them without considering that they may be able to get back on track through a helping themselves.
Unfortunately, millions of people have faced, are facing, or will face financial issues at some time in their lives, these financial problems may be caused by a sudden illness, job loss, divorce, or simply by overspending; irrespective of what the causes are, the bottom line is that debt can soon become overwhelming and an unbearable burden to cope with.
However, there are many solutions that offer debt relief and those times that are financially difficult can soon be overcome. One such solution is to devise a precise yet feasible self repayment plan that will assist in removing the burden of excessive debt and any other worrying financial troubles.
The first step to arranging a repayment plan is to acquire a firm understanding of ones present financial circumstance. To do this a list must be written containing all outstanding debts: home loan, auto loan, all outstanding credit card balances, store cards, in fact everything you owe. As well as listing the remaining balance of each debt you will need to list the minimum payment and the interest rate for each.
Once you have completed your list you will then need to prioritize it. Obviously those debts that are secured, such as your mortgage, must be maintained but all unsecured debt can be prioritized.
There are different recommendations on how you should prioritize your debts depending on who you speak to. Some experts suggest that debt should be paid off in order of highest interest rate to lowest interest rate, whereas other experts have the opinion that clearing with the smallest debt working up to the largest helps create a momentum of debt clearance and a psychological boost to the debtor as they can see debt being cleared sooner. Both methods will have the desired effect of reducing and eliminating debt, but personally I would rather get rid of the high interest debt first, but as I said that is a personal preference.
Creating a list of priority and non priority expenses is the next step; your priority expenses will include your phone, utility bills, food, clothes and also a non priority list of expenses; entertainment, hobby expenses etc.
Once that is done you must make a list containing all forms of household income; your salary and that of anyone else who contributes towards the household budget, and any other source of revenue. Subtract all your household and living expenses from your income and the sum that you have remaining is what you can afford to pay towards your debt.
In many cases excessive non essential expenses can be the reason why there is a shortfall when it comes to paying bills so this simple exercise will highlight this. If this is the case cutting back on your non essentials will provide you with the funds to help with a self repayment plan.
If, after being as severe as possible with your entertainment and non essentials, you still haven’t enough to go towards your self repayment plan you may have to cut back on your essential expenditure. Downsize your car to a more fuel efficient model, walk or use public transport instead of driving, become more energy efficient at home to cut back on the cost of utilities, grow your own vegetables if you have a garden. The buzz word here is ‘frugal living’ - you would be amazed how much you could cut back on your costs with a little effort.
Creating a feasible budget is the second most important aspect of making a self repayment plan the most important is being able to apply yourself to maintaining and living to your budget. Having the conviction to see this through is paramount as without that conviction you will continue to struggle to resolve any financial issues you have.
It is also important to build into your budget a portion of your money that can be put away for emergencies and unforeseen expenses. Needless to say that a well planned budget will direct most money towards debt repayment.
This outline, if followed with self discipline and a concerted effort, will help you overcome your debt problems within a short period of time, but it is vital to your plans success that you NEVER take on new debt until you have complete control of your financial position and have finished your repayment plan.
Are you are fed up of being in debt and continually dream of the day when you are no longer a 'debt slave' to the financial institutions.Sounds great I know, but it can be a reality! If you like to know more about methods of debt elimination that will have you debt free SOONER THAN YOU THOUGHT POSSIBLE? Visit -
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