Tips for Staying on Top of Your Debt
A course that should be mandatory for all high school and college students should be one that deals with personal finance and debt management. People think about debt management in terms of businesses and the rate of borrowing and lending that takes place in the economy, but they do not necessarily connect these concepts to their personal financial situations.
The good news, in the wake of our current recovery from the economic downturn of 2008, is that household debt, as measured by the Federal Reserve Bank in the United States, fell in the first quarter of 2013 to levels not seen since 2006. The bad news, however, is that the amount of household and personal debt is $11.2 trillion, with student loan debt nearing $1 trillion at $986 million. If you are looking to bring down your level of personal debt and keep it within a manageable range, here are some tips for you to consider.
Obtain a Current Credit Report
Before you can make a plan to get ahead of your personal debt situation, you need to know where you stand. The simplest and least expensive way to do this is by ordering your free annual credit report. Under the Fair Credit Report Act of 1970, you are entitled to a free copy of your credit report from the major credit reporting agencies (i.e. Equifax, Experian, and Trans Union). Your credit report will do two things for you: it will tell you what you owe (or, more importantly, what shows on your credit report) and show you if there are any errors on you report.
Use this information to assess your debt level and determine how much you owe as well as the number of items that are in a late pay or delinquent status. You should also use this information to correct any erroneous items and get them removed from your credit report immediately.
Negotiate Outstanding Debts
With the information that you gather from your credit reports, seek the services of a credit counseling service for help in negotiating a payment plan for your outstanding debts, particularly those that are in a delinquent status. Not only will you find that this process is easy to accomplish, but it may help actually reduce the amount that you owe to various creditors. Generally, amounts that have been outstanding for a long period of time, if large enough, trigger a series of annoying telephone calls and in some instances legal action.
A credit counseling service can help put an end to the phone calls and stop legal action by negotiating a payment plan on your behalf. In some instances, a creditor may be willing to accept a lower agreed upon amount under a payment arrangement for the purposes of retiring the debt, which will benefit you in the long run.
Make a Budget (and Stick to it!)
As you begin the process of managing your debt and getting a handle of your financial situation, make a budget. A budget helps you see your inflows, or the amount of money that you bring in (income), and your outflows, or the amount of money that is going out (expenses). Ideally, you want your inflows to be higher than your outflows; when this is not the case, you need to look at where the money is going and make required changes.
Category: Debt
