When you are feeling overwhelmed with debt, it can be intimidating and overwhelming. If you are worried about facing bankruptcy, the best thing you can do is reach out to a credit counselor and try to get control of your spending. Here are some steps that you can take on your own to regain control of your expenses and get out of debt.
Know Where Your Money Goes
The very first step to getting control of your finances is to understand exactly what your current financial situation looks like. Start by creating a detailed summary of the money you earned in the last three months as well as everything you spent. This will make it easier for you to see exactly where your money is going and how thin you may be stretched financially.
Create a budget for the coming months as well. Make a list of your income sources and amounts, and then your fixed monthly expenses. You'll want to identify every bill that you need to pay, including credit cards, loans and other expenses. The goal is to make sure that you have enough coming in to cover what's going out.
After you build the budget, the goal is to stick to it as closely as possible. The more comprehensively you follow the budget, the better your chances will be of paying your way out of debt without needing bankruptcy.
Don't Spend What You Don't Have
Although it can be tempting to take advantage of a financing option or a credit card offer, don't apply for any new credit. Avoid any unnecessary expenses as well. Consider all of your expenses and make sure that everything you spend is necessary. Stop carrying your credit cards around with you. Store them in a locked drawer so that you aren't tempted to overspend.
Reduce or Eliminate Smaller Recurring Costs
If you are buying lunch every day or paying for a subscription to a streaming service, start bringing lunch from home or cancel the subscription. Every monthly payment you can eliminate is a payment that you can save or put into debt reduction.
Another expense you can cut is bank fees. Look at the schedule of fees for your bank account and eliminate any that you can. For example, keep your account reconciled so that you avoid any overdraft fees. Over time these costs can add up.
Manage Your Debts
In order to avoid bankruptcy, you'll want to start prioritizing your currently outstanding expenses. Start with the debts that have the highest interest rates first. This will save you significantly over time. Once you pay that off, move to the next highest interest rate. Whenever possible, make more than the minimum payments on your credit cards to help reduce your interest charges over time.
Talk to your creditors as well. If you can negotiate a deal with the creditors, you might be able to reduce your payments or even settle your account with a lower balance simply by making the payment in its entirety.
Consider a Consolidation Loan
Sometimes, a consolidation loan is the best way to pay off outstanding debts. If you have a financial institution that you can work with and rely on, take out a consolidation loan. The goal of a debt consolidation loan is to pay off your debts and leave you with a single monthly payment.
Work with a Credit Counselor
Credit counselors are trained to help you not only manage your money, but control your debts. Credit counselors teach you how to manage your money so that you can avoid these problems in the future. Your credit counselor will also teach you about building a savings account and how to follow your budget.
With the tips presented here, you can reduce the chances of finding yourself facing a bankruptcy filing. By getting control of your household finances before you find yourself in overwhelming debt, you can avoid the stress of collections calls and the bankruptcy hearings.
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