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Changing Your Relationship With Debt

Debt can be a terrible burden to have to live with. What can start with a small amount on an overdraft can slowly snowball into tens of thousands owed to various different companies. Pretty soon, you will be juggling a whole host of repayments to several loan companies. 

Debt can lead us to make some pretty poor decisions with our lives. It can make us desperate, and in the worst cases, can cause us to turn to crime to try to solve our problems. The cycle of debt can also cause severe problems when it comes to your relationships. The stresses and strains of harboring a large amount of financial weight can bring us to breaking point with our loved ones. If the debt is shared, not dealing well with the stress can create cracks. But if the debt is primarily on one partner, this can cause a whole different set of tensions. In many cases, people choose to hide their debts from their partners, and this will only lead to a feeling of betrayal and mistrust. 

Debt can tear families apart and put people on the streets. And, if you are in any way struggling with debt, you should take immediate action to stop it from ruining your life. This can be hard to do, and you may not know what the best course of action might be, or who to turn to for support.

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Image by Steve Buissinne from Pixabay

Getting The Help That You Need With Debts

In the first instance, when it comes to dealing with personal debts such as loans, credit cards, or student loan debt, you should reach out to a friend, family member, or partner and ask them for help. To be clear, this does not mean that they should lend you money. Quite often, taking a loan from someone that you are close to can be problematic as it may lead to arguments. It is only useful if it is a meaningful amount of money that can be used to clear entire debts. Otherwise, it is often just adding to the problem. 

The type of help that you will want to get is emotional support and constructive advice. Being able to talk to someone about your money problems will be vital as it can help you feel as though you are not alone. 

If you have a partner, make sure you involve them in the situation. They have a right to know about the problems that you are facing, even if they do not directly affect them, it can still be a cause of great tension in your life, and they need to be able to support you through it. 

Seeking Support From Debt Charities

To get support, you should reach out to the citizen’s advice bureau, or a debt charity such as Step Change. Having help from people who are trained to deal with your specific problems will be greatly beneficial to you and your situation. 

They may be able to signpost you towards a robust solution so that you can start to overcome your situation. There may be ways things that you have not thought about doing that can help immensely. 

If you have a complex relationship with managing your money or the stress of your situation is weighing down on considerably, then you might need to talk to a counselor who can help you to process the problems that you are facing. 

Restructuring Your Personal Finances 

One of the primary ways that you can fight debt in your life is to change the way that you deal with your finances. You may be in the habit of ignoring the money that you have going out because it causes you stress or anxiety. This is perfectly natural, and this is a defense mechanism that you will have developed. Unfortunately, it is not terribly helpful getting you out of debt and could, in fact, cause your problems to worsen.

Getting ahead of your debts will mean understanding where your money is being spent every month. For this, you will need to create a full and thorough assessment of your income and expenditure. You should ensure that you do need to leave anything out and be fully honest with yourself about what you are spending money on. Denial will only worsen your situation. 

Start with your most essential outgoings first. This will be your mortgage or rent payments. This will be outgoing that you probably cannot do very much about, but it is important that you prioritize paying it. 

Next up, look at things such as your utility bills. Your gas, electric, water, phone, and broadband. You may be able to lower your consumption or switch suppliers for many of these things. So, shop around and make the switch to the company that offers you the best deals. Make sure that if you are on a limited offer, that you understand the terms and look at switching again if the prices start to rise. 

Your debts should obviously be on the list. You need to pay these every month so that you are not going to get further into the financial black-hole. More on how to reduce the payments on these later. 

Then you will get to your non-essential spending. This will include items such as satellite and streaming subscriptions, gym memberships, as well as memberships to clubs. There may be things that you are paying out for that you don’t even remember that you have. These are prime examples of things that you should cancel in order to save some money. 

Setting yourself budgets for your food shopping is a good way of managing your money. Have a look at home much you are spending on average each month and try to use that as a basis for planning. Think about areas of your shop that you are spending too much on. Are you buying branded items, when an own-brand product would be much cheaper? Get yourself into the habit of shopping in a more savvy manner will mean not picking up impulse buys and working off a shopping list. 

One way of managing your spending is to spend more time planning meals. If you are cooking from scratch, and also have a plan for your meals each night, you can use cost-effective techniques to get ingredients that can be used across a number of meals so that nothing gets wasted. 

Keep in the habit of documenting and tracking everything that you are spending. It may feel completely unnatural to you, but doing this will teach you to control the way that you use money, Building a new relationship with your finances takes time, and eventually using spreadsheets and checking your online banking regularly will feel natural. 

Restructuring Your Debt

One way to deal with the debt that you have currently is to take out a consolidation loan. If you have multiple debts, you will have a few different interest rates. Some of your debts may be more pressing than others, and you may constantly be juggling them. When it comes to paying them off, you will probably not get to pay them all off as there will always be one or two of your debts that keep escalating because you have too many to manage. 

Taking out a consolidation loan will mean that you can put all of your debts into one easily affordable monthly payment. This will make the overall debt much easier to manage. 

Once you have paid off all of your other debts with your consolidation loan, you should cut up your credit cards and close the accounts so that you are not tempted to go back into more debt. 

Worst Case Scenarios

If your debt has gone too far, you should get in touch with a firm that can negotiate with your lenders to agree on a settlement. Doing this may mean that you can avoid filing for bankruptcy, while also giving you the opportunity to clear your debt in a more manageable manner. 

The lender may agree to cut some of the debt for you. There will be an agreed-upon payment plan that will be easier for you to manage in your current situation.  

Nobody wants to file for bankruptcy, or have any court judgments hanging over them because they have failed to pay a debt. Getting in there early and discussing your options with a company that can renegotiate your position may be greatly beneficial to you. 

Getting out of debt may well take you a great deal of time and effort. It will need you to remain focused and change your way of thinking about money. It is possible to get out of debt, though, and although it may feel as if it is the end of the world when you are tangled up in interest and loans, it can get better. Reach out and get the support that you need, but most importantly, work at yourself in order to improve your own relationship with money and debt. 

Is There A Credit Gender Gap?

In the US, Moms are 3.6 times more likely than dads to give their kid a credit card, according to a new WalletHub survey released today. Parents can make their child an authorized user on their account and give them their own card tied to the parents’ credit line.

Making a child an authorized user can be good way to teach them responsibility and help them build a credit history before they are old enough to have a credit card account in their own name. However, not all parents decide to give their kids a card. Below are a few key stats from WalletHub’s survey:

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Key Stats

  • 2.4X more daughters have credit cards than sons.
  • Kids in private school are almost twice as likely to have a credit card.
  • Dads are 3.4 times more likely than moms to monitor their kids’ credit card spending.

Q&A with Odysseas Papadimitriou, CEO of WalletHub:

What is an appropriate age to give one’s child a credit card?

“It’s a good idea to give your child a credit card for emergencies when they are in high school,” said WalletHub CEO Odysseas Papadimitriou. “That’s when young people start to exercise their independence more and more, making access to funds for emergencies increasingly important. Plus, adding your child to your credit card account as an authorized user can help them build some credit history, making it easier for them to get their own account after they turn 18. When they’re eligible to get their own account, set your child up with a secured credit card, and have them fund the security deposit themselves. This will give them good practice without too much risk. But it will be their own money at stake, which is important.”

What explains 2.4X more daughters having credit cards than sons?

“My guess is that parents tend to see their daughters as being responsible enough to handle a credit card at an earlier age than their sons,” said Odysseas. “However, the need for financial literacy is gender-agnostic. And the kids who are least responsible may actually need the most hands-on training.”

Should parents closely monitor their kids’ spending?

“Parents should monitor their kids’ spending, both to keep them safe and because it can provide some valuable learning opportunities. But they shouldn’t try to be sneaky about it,” said WalletHub CEO Odysseas Papadimitriou. “Rather, parents should discuss spending decisions with their children in order to help calibrate how they think about money and improve their financial literacy. Credit cards make this whole process a lot easier than cash.”

A copy of the full report can be found at https://wallethub.com/credit-cards#survey.

Hitting the Financial Bottom: 3 Options for You to Consider to Prevent Debt from Ruining Your Life

If you are unable to pay your debts, it’s always advisable to seek professional assistance as soon as possible. Taking prompt actions against such cases helps remedy your financial situation. Unfortunately, finding solutions to one’s debts is not as easy as it sounds. If you find yourself hitting the financial bottom as a result of your debts, here are a few strategies to consider.

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Debt Management Plans

These kinds of plans make it possible for you to settle your unsecured debts in full, but often with fees waived or with reduced rates of interest. A debt management plan allows you to make a single payment to the credit counseling agency every month. The payment made is then distributed among your creditors. With this approach, however, you will have to live without your credit cards because they will be closed until the plan is completed. Although the debt management plans cannot affect your credit scores, closing the accounts will most definitely do. Therefore, make sure you apply for credit cards again once you have completed the plan.

Bankruptcy

There is little or no point of entering a debt management plan if you cannot pay as agreed. You can always talk to a bankruptcy attorney before you can decide to pursue any relief plan. Most attorneys will not charge for the initial consultation, so do not fear approaching one.

The most common type of bankruptcy is Chapter 7 liquidation and this can be used to erase the unsecured personal loans, credit card debts, or even medical debts. If you qualify for this process, debt relief can be done in a period of 3 to 4 months.

You should note that not every individual with an overwhelming amount of debt qualifies for debt relief through bankruptcy. For your family size and state, if your income surpasses the median, you may be required to file Chapter 13.

There are numerous law firms that can offer the professional help you need. Make sure you search around to ensure you are working with the best bankruptcy attorney in your area. You may also consider visiting www.steinbergerlaw.com/ to learn more about Chapter 7 bankruptcy.

Debt Settlement

This approach should always be the last resort when it comes to seeking debt relief. Debt settlement organizations often ask debtors to stop paying their debt and place their money in their controlled accounts instead. As the money accumulates, the company approaches every creditor, and you as the debtor continue to fall further behind payments. This approach may work since the fear of not getting anything may prompt the creditors to accept any form of settle even when it means getting a smaller lump-sum, as long as they agree not to pursue the debt any longer.

However, with this approach, you subject yourself to collection calls, potential legal action, or even penalty fees. Debt settlement cannot stop any of these from happening while the negotiations are still ongoing.

Last Words

When you are about to hit the financial bottom, make sure you consider the three options above. Best of all, make some time to talk to a bankruptcy attorney to get all the help you need when seeking debt relief.

 

Credit Card Debt – Are You Paying Thousands in Extra Interest?

Millions of people around the world use credit cards and despite our best intentions of clearing the balance very month, most of us will carry a balance. In fact the average outstanding credit card balance is $5700 in the USA (source ValuePenguin) and is over £2500 in the UK.

Chances are when you take out a new credit card you will be offered the opportunity to pay via direct debit either the full balance or the minimum amount every month. Since most people use credit cards as flexible spending for emergencies or contingencies it can be difficult to commit to paying off the full amount. This is especially true when transferring a balance from another card.

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Statistics show that over 65% over credit card holders carry a balance from month to month

Did you know that if you opt to pay the minimum balance you could take over 20 years to pay off the card? It is far better to agree a fixed monetary amount each month than the percentage which is often suggested by the credit card company.

The video below explains in more detail and you can prove it for yourself by using a credit card calculator

For more financial education tips and videos visit The Personal Finance Academy

Skip The Rut & Avoid Debt

When it comes to money, people often find themselves stuck in a financial rut because of bad management. The best way that anyone can avoid getting themselves into a mess is to be proactive about how money is managed and spent. The trouble is, money is such a tempting thing and getting into debt is far easier than it should be. Many people fall into the trap of short-term satisfaction with credit cards and loans and then have to suffer the long-term difficulties of making repayments.

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It can be very easy to run up a mountain of debt through credit cards as they are so very easily available. Trying to avoid being in a rut means a lot of self-control and willpower, and only paying for things as you can afford them. The trap happens where you need to borrow and repay money on time to build an efficient credit rating, and that can spiral out of control. There are companies that are out there like creditrepair.co that can assist with fixing your credit rating as you need it, but it sometimes can be better to avoid the bad credit in the first place. Building and maintaining a healthy credit rating can mean that you pay far less interest on your borrowing and this can start at an early age. There are some ways you can manage your money and not get stuck in a rut of debt, and we’ve got some of those below for you:

Keep Employed. Okay, so it’s not always possible, but maintaining a secure level of employment is a great way to minimise debt. Secure income means not having to turn to other means to get things paid, as you have a regular amount coming in each month. By ensuring you don’t lose your job, you can keep things smooth and ticking over correctly. Losing a job can happen randomly and sometimes this can be without fault, and you want to avoid this happening as much as possible. Maintain a network with your colleagues and clients so that if recession hits and you are made redundant, you have contacts in your field to fall back on.

Pay Taxes. Taxes are one of those bills that you must pay no matter what happens. Owing money is hard enough but owing the IRS is a whole other ball game. Make your tax payments a priority as early as possible in the year, and be vigilant about keeping money aside each month to pay for your taxes. Contacting the IRS and enquiring about extensions or making part payments is going to help if you feel like you can’t manage your usual tax bill, but if you don’t call them that’s where the issues begin. Avoid that debt by being organised.

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Ultimately, you have to be savvy. When it comes to buying the things that you want, only get the things you can afford. If you can’t afford what you want, then it’s time to save up and wait. Don’t just move onto the credit cards or tap into your savings as you will likely need your savings! Be financially smart and you can reap the reward as you go!