If you feel like a small ship with a broken rudder on a large and stormy ocean when you look at your debt you are probably hoping for some sort of miracle to happen. A lot op people in this situation revert to gambling solutions such as plying the Lotto. Well, unfortunately for those who employ this type of tactics there is only bad news, as this will only result in heartache and financial disaster. Statistically speaking you have an extremely small chance of winning the jackpot. This type of spending should be avoided completely. In any event it is much better to invest your available cash in something that you may have some control over.
The miracle you need may rather be found in one of these ways discussed in this article to lower your debt payments. There are no guarantees in life and following the advice in this article may also not produce the desired outcome, but at least following these recommendations will give you the best chance you have to come out in some reasonable form on the other side.
If your financial position is such that it feels to you that it is getting out of control, the time has come that you take real quick action in order to resolve the situation.
The Road to Recovery
To get out of debt, you need to follow as structured approach. It is probably at least partially a lack of structure and planning that go you into the debt position you are in. In order to ensure that the road to recovery results in a solution that is sustainable you need to follow a structures approach.
Evaluate the Historic Path to Your Current Financial Position
You may want to bury the painful past as soon as possible, however irrespective of how painful it is you need to evaluate all the activities that contributed to your current financial position. It is very rare that your debt will be out of control as a result of one or two events. It is more likely that the debt position came about as a result of a sequence of events that was long in the making.
The biggest mistake you can make is to focus on the last straw that broke the camel's back. If your inability to service your debt is as a result of you lost your job take care not to only focus on this event. Also look at the timing and type of debt you ran up. Valuable lessons can be learnt from carefully considering these and other factors.
Objectively Assess Your Financial Situation
You may like you are having a bad dream and the faster you try to run the more you are tangling in the unseen tentacles and the monster is getting closer and closer. Like in a bad dream the best tactics is to wake up. In financial terms that imply that you must objectively assess your financial position. If you look at all your debt and all your available cash as well as the sources of funds available you may see that the debt monster is only a bad dream. If after doing this you still do not see the light the next step is to negotiate with creditors.
Negotiate With Creditors
The people who offered you the debt in the first instance are normally in the best position to assist. It also makes sense to talk to them as they have an interest in resolving the issue amicably.
The first step is to make a list of your current debtors. Make sure that you do not leave anybody out. The obvious ones are those ones that send you monthly statements, but also consider the debts that have different payment intervals like the quarterly payments required by some institutions as well as any annual payment that may be required. The fact that some of these payments may only be required to be made some time in the future is irrelevant as it is payments that you must plan for.
Once you have come up with the list of people and institutions that you own money to note the total amount owed to each. The interval payments (such as installments) must also be recorded against each creditor's name. With this information you should calculate how much you can afford to pay each creditor. Be fair and equitable when doing this calculation and keep careful record of the criteria used, you may have to explain your thinking later.
Armed with this information, make an appointment to see the person in charge of each of your accounts. Be well prepared when you go to the meetings and explain that you are willing to pay the debt but can only afford to pay the amount you calculated. If the person is not prepared to or in a position to agree to the reduced payment amount make an appointment with a more senior person and keep a record of who you contacted as well as the outcome of each meeting. Never say that you cannot afford to pay the debt as this can be seen as a declaration of insolvency and may be used against you later.
Once you get to an agreement make sure that you get the agreement in writing, preferably on a company letterhead. Ensure that you then make the payments in accordance to this agreement.
Avoid New Debts
In order to get out of debt it goes without saying that more debt is an absolute no-no. You have to be careful in times like this as it may seem like a good idea to take more debt. The problem is that you are just postponing the inevitable as all debt have to be settled at some time and if you cannot afford to service existing debt your position will just be worse when the time comes that you have to start paying the new debt.
You should avoid using credit cards, even if they offer free credit for a period of time. In fact a good strategy would be to cancel all the credit cards you have with a zero balance. Also make sue you cancel all agreements that requires regular payments, especially those that adds little value to your lifestyle or that you seldom use but still pay for.
You should endeavor to stop utilizing credit for your daily living expenses altogether.
Everybody agrees that you must continue living and that costs money. The problem is that it may be you lifestyle that contributed to current financial position. You should evaluate all expenses you make. A good idea is to have a philosophy that you will not spend money on what you need but rather limit expenses to items you cannot go without. To have control over you spending you need to have a clear understanding of all your monthly income and expenses and try to find out if you've spending more than you are earning.
Remember that you MUST prevent excessive expenses if you want any chance of a sustainable debt clearance solution. In order to provide you with assistance with this you must develop a comprehensive expense budget and stick to it.
It is only logical that your debt position must improve if you increase your income. Most authors on this subject recommend this but few gives practical solutions in this regard. In order to increase income you first have to understand the basics. A day is conveniently divided into three eight hour shifts. Most people work the first shift to make ends meet and rest or sleep the second shit to be fresh to work the first shift. The key to success lies in the third shift. Successful people all have one think in common they utilize the third shift successfully.
There are a number of things you can do during this shift to get out of debt and even get to a financial position where you could be financially independent. A part time job is but one of the potential solutions. There are a number of other ways that you can utilize to earn some extra cash. For more information on this topic consult my article about this on ezine.
If you want to get out of a debt spiral you have know choice but to develop a structured approach to resolve issues with your creditors and also manage your finances better. In addition it is a good idea to improve your position by utilizing the so called third shift.