Debt, the amount a person or entity owes to a creditor for funds borrowed, is a problem for many American households. For consumers who are not careful, a useful money-management tool when handled responsibility may turn into a monster capable of wreaking havoc on individuals when abused.
Debt issues can limit your options and impact your life in a lot of negative ways from buying a home to getting a new job. In many instances, though, reducing the cumulative burden of credit card balances, home mortgages, and loans boils down to a few straightforward steps:
1. Give yourself a reason to say “no.” Promise yourself that if you reduce your debt burden by a certain amount or percentage, something good will happen: taking a vacation, quitting a second job, or buying something you have wanted for a while.
2. Get a clear picture of what you owe, the interest rate each creditor is charging and how you are spending your money.
3. Plan, prioritize, and be patient. Some people prefer to start paying off their largest or highest-interest-rate debts first. Others might opt to start by paying off smaller debts in their entirety, while chipping away at the larger, more imposing ones. Regardless of how you approach it, you need a debt reduction plan, and patience. It takes real, focused attention to get out of debt and it takes time to make progress.
4. Be resourceful. Consult with a financial adviser specializing in budgeting and debt, or use free counseling resources such as the National Foundation for Credit Counseling. Also look into debt support groups locally and online. Organizations such as Debtors Anonymous sponsor local meetings around the U.S.
5. Track spending habits, tighten the screws where necessary. Rather than leaving excess funds in your checking account, use it to pay down debt. Give yourself a weekly or monthly stipend to function as a spending ceiling.
6. Watch out for profiteering debt settlement organizations that promise a lot, deliver less and charge plenty along the way.
This article was submitted by the Financial Planning Association, the membership organization for the financial planning community. FPA members are dedicated to supporting the financial planning process in order to help people achieve their goals and dreams. Submission of this article does not imply an endorsement or recommendation of the Financial Resource Center site.