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.

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

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.


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.


Trade Interest Rates To Achieve Top Savings

The economy has undergone a seismic change in recent years and historically low interest rates have radically altered the way people behave in the financial markets. A generation ago it was unusual for individuals to carry any personal debt other than a loan for a vehicle. Traditionally it was the case that savings accounts were built up for purchases of household items and most people only bought items when they had saved up enough money to complete a purchase. There has been an explosion in unsecured lending in recent years in the form of credit card and store card debt and much of this has been driven by retailers who have used credit as a means to fund a continued growth in sales. Shareholders and the markets have expectations of continued growth and it appears that this has been funded by a growth in credit. It is not uncommon for those with relatively high levels of debt to also hold savings accounts but the return on savings is usually linked to a base rate of interest which is currently at rock bottom. The low levels of returns on savings are discouraging new saving and is also creating an opportunity for savers to use their funds to reduce debts.

Clear Down Most Expensive Debt

Basic maths shows that it is better to clear down debts that are incurring charges of up to thirty per cent for a typical storecard than to leave savings in an account that is only earning around one per cent. The decision may not be so clear cut for some people but generally it is recommended that savings are used as a means to cut debt and it is better to start with debt incurring the highest rate of interest. It is important to look at the whole picture as there may be good reasons for not utilising all savings to clear down debt.

Remain Flexible For Genuine Emergencies

People still like to save for emergencies and it may be the case that if debt levels are reduced a credit card firm may decide to reduce a credit limit in order to reduce its own exposure to bad debt. This would mean that an individual may clear down some expensive debt but be left with little or no flexibility if faced with an emergency such as a defect in their central heating system which required urgent attention. With no savings or available credit to rely on there may be few options to resolve an immediate problem so it may be wise to retain some level of saving for such emergencies.

Consider The Term Of Outstanding Finance

It may be sometimes more important to clear debt which has a specific lifespan and would be difficult to replace once that time had elapsed. A saver may be faced with an option to clear an expensive storecard or a relatively low interest mortgage account. Whilst it may appear to be beneficial to reduce the expensive debt it may be the case that the mortgage debt has a fixed term which must be adhered to. If the term is allowed to expire and a solution to clear has not been found it may no longer be possible to simply ask the lender to extend the term as criteria for lending may have changed. In this case it would be more prudent to clear down a low interest account purely because of the fixed term involved. If debts appear to be complex and unmanageable then it may be appropriate to seek debt help so that an effective strategy can be developed. It is important to monitor the financial markets and review savings rates periodically because banks exploit consumer intertia by reducing interest returns on existing products whilst hooking new customers with attractive rates on new products. It may be the case that by switching savings accounts or products it is possible to achieve a higher rate of return that reduces the case for using savings to clear down debt, especially if most of the debt is held in a low interest mortgage.

Are There Short Term Alternatives Available?

Psychologically it may be important to maintain some level of saving as this buffer may offer comfort that would be eroded were a balance used in its entirety to clear debt. Maintaining some level of debt is not a bad thing either as credit scores are enhanced if debts are incurred and payments are met on time. This can be useful when applying for a mortgage as a potential lender will be able to form a view of a borrower that demonstrates a commitment to responsible actions when dealing with debt. There may be little value in removing savings early from a fixed investment plan to clear debt as early withdrawal penalties could offset any interest savings made by debt clearance. A better long term plan may be to seek a cheaper alternative form of credit such as a zero per cent balance transfer period to reduce interest exposure temporarily allowing time for fixed terms to expire so that the savings can be used to clear down debt in a timely manner that does not incur early withdrawal penalties.

Action Is Essential

It is clear that by not taking action there are likely to be inefficiencies in financial arrangements exposing individuals to low rates of return on savings and high levels of interest on debts. Whilst it may appear obvious that high interest rate debts should be cleared with low return savings it is important to review the overall financial situation and factor in long term objectives before making wholesale changes. The term of debt is an important factor as are assessments of medium term cashflow requirements and a balanced approach will lead to an optimum solution.

6 lessons to teach your kids how to stay away from debts in future

Many parents are not particularly inclined to discuss their debt and finance related issues with their kids. As an invariable result, kids remain unaware of crucial financial factors like debt management, savings, account dealings and face severe difficulty to handle these matters in the long run. There are certain skills and habits which every child needs to learn and develop from an early age. Financial discipline is one of them. If your kids come to know how to effectively spend, save and survive today, they can surely attain a better financial future tomorrow. Follow the instructions given below and provide your children the basic knowledge required to stay out of debt in future.

  • ‘Children need models more than they need critics’. The first lesson of money management to kids starts when their parents are not even aware of it.  Kids follow the footsteps of their elders blindly. Manage your finances well and spend your money wisely to set a perfect example to them. To stay out of debt spend within your limits. To teach your kids the difference between wants and needs, live frugally. Being frugal does not mean spending no money at all; it means think before you buy, and wait to buy until you can afford it.
  • Discuss your financial issues with your children. No matter how complicated your financial status are, attempt to make some simple bed time stories with them. Do not evade or ignore any of their queries, answer them clearly. Show them how you pay your due bills and how the ATM, checking accounts or credit cards works.
  • Make your children financially responsible by letting them spend money on their own. Of course, you are there to guide them but, make sure your child grow up making some of their own financial decisions as well. Let them commit mistakes and learn the lessons from them. If needed, confide in them your financial blunders in the past. In this way you may not be able to stop them completely from making any mistakes but at least they will be less likely to repeat these mistakes as adults.
  • Take into account your kid’s feedback and suggestions while you are planning your budget. This will give them an overall idea about the price list and monthly expenses. Make sure it should not make them feel guilty or upset for costing you so much.
  • Young kids love to collect and save pennies, present them with a piggy bank to indulge in this habit. For teen kids you better open a savings account and let him watch it grow. It will generate a sense of interest and excitement in them and they will put more efforts and hard work to save in these accounts. Excitement and anticipation both are essential to make your child keener to save money.
  • Start giving your child a weekly or monthly allowance from an early age. Instruct them not only to manage their weekly expenses within limited means but also to save a portion of it. Trigger their emotions by teaching them to donate a portion of their savings to people who are less fortunate.

All these above mentioned points are lifelong ways to teach your kids about money management. When your child becomes old enough to ask for toys or candy, it means they’re old enough to learn some lessons of financial awareness as well. As soon as they learn to count, you can start imparting your basic lessons about spending and saving. Remember the sooner they learn these lessons and apply them to their lives, it is better for their financial well being.