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10 Steps Toward a Debt-Free New
Year
by Deborah Taylor-Hough
Have you examined your family finances lately? Are you shocked and
anxious about the amount of debt you have? If your New Year's
resolutions include getting out of debt or getting your financial house
in order, here are ten easy steps for regaining financial control in the
New Year:
1) Seek help. If you're not sure how to proceed, or you're feeling too
overwhelmed to act for yourself, call a non-profit credit-counseling
program for advice and assistance in working with your creditors to set
up a repayment plan. Consumer Credit Counseling Service has offices
throughout the US. Call 1-800-388-CCCS, 24 hours a day, for an office
near you. You can also find information about debt problems from your
local church, library or bank. Look for information online as well.
2) Contact your creditors. As soon as you're aware you won't be able to
make a payment, contact your creditors. Creditors are more likely to
work with you if they're contacted before the payment is actually
overdue. Debt collectors are trained to solve payment problems, so don't
be afraid to be honest with them about your financial situation. Stay
calm. If you commit to paying the bill by a certain date, be sure you
follow through on that commitment. The creditor won't be likely to work
with you again if you don't keep your payment promises. If you can't
make your minimum monthly payments, write to each creditor individually
and see if you can work out smaller regular monthly bills. Be sure to
explain to them why you fell behind in your bills, your current income,
your other financial obligations and the exact amount you can pay them
each month.
3) Cut up all credit cards and send them back to the issuing companies
immediately. Officially close all credit accounts. A temptation when you
start seeing lower balances on your accounts could lead you to charge
the credit limits right back up again if the accounts remain open. Don't
take out more loans or open any new credit accounts until back bills are
paid in full.
4) Set a frugal budget and live within it. It's usually easier to
decrease spending than increase income. Don't make any purchases above
and beyond the absolute basics until you've made some headway in
catching up on your back bills. Consider selling assets to find more
money for your debt repayment. Even holding a large garage sale can
sometimes generate enough money to help pay an immediate bill or two.
5) Prioritize debts. Mortgages, child support and any debts that have
gone to a collection agency are a priority. After you've identified the
first priority debts, look for the credit companies that are charging
you the most interest.
6) Pay each creditor something. No matter how small the amount you're
able to pay, it will show good faith on your part as you try to
negotiate payment arrangements.
7) Track personal spending. It's important to identify any holes where
your money is draining out. Keep a detailed record of every expenditure
for one month, no matter how insignificant. Little expenses on a regular
basis add up quickly. Carry a small notebook with you and write down
every single purchase. Now you'll know where your money's going.
8) Plug any holes discovered from the spending record. Small leaks sink
great ships … even financial ones.
9) Plan ahead for annual expenses (i.e.: insurance, car licenses,
medical deductibles, etc.).
10) Set long-term financial goals. After setting concrete, definite
goals for future financial health, make all current financial decisions
with your future well-being in mind. Keep the end result in mind --
debt-free living!
The key to getting your finances in order is to control spending and
funnel that money into retiring your debt in an orderly fashion. Make
sure that your debt is not growing, but shrinking a little every month.
As your debt disappears (and it will, if you keep after it!), plan to
put the money you have been putting toward debt reduction into a savings
plan. That money will start earning you money rather than paying off
growing interest payments. That will be a happy day!
About the author
Deborah Taylor-Hough (free-lance writer, wife and mother of three) is
editor of the free ezine Simple Times
join-simple-times@hub.thedollarstretcher.com and author of several
books including
Frozen Assets: Cook for a day, eat for a month!
(Champion Press) and
Frugal Living For Dummies®” (Wiley Publishing).
Visit Debi at:
http://hometown.aol.com/dsimple/
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