5 Reasons Why You Are In Debt

Posted under

Have you ever wondered how you accumulated so much debt? Here are the biggest reasons Americans are finding themselves in debt today. If you are in debt, the sooner you decide which scenario fits your financial situation you will be that much closer to doing something to change it.

Getting divorced is a big reason people find themselves in debt. The divorce rate in America exceeds 50% and many people don’t learn after the first time and repeat the process. There are a lot of legal fees involved in divorce. You may also have to give up some of your assets and might get stuck with expenses that you weren’t accustomed to paying.

When your expenses stay the same or increase and your income does not keep up with your expenses you will see your debt begin to grow. It usually takes people a while to realize they are in this situation and as a result it takes them a while to make adjustments in their lifestyle to keep their spending in line with their income. The sooner the adjustments are made the less financial damage will be done.

Unemployment is another reason for financial hardship. Even if you collect unemployment, it is usually a percentage of what you were making while you were employed. People are rarely prepared financially to have their income reduced substantially or stopped completely. In most cases if you are unemployed your debt will mount very quickly.

Bad management of your money is another financial pitfall. Without keeping track of how you spend your money you may be spending large sums of money on unnecessary things and not even be aware of it. If your finances need help, start by listing all your monthly expenses so you have an idea how much you are paying out. You will also need to keep a log of ALL the money you spend each month. Once you can see where the money is going, it will be easier to see where you are able to make cuts in your spending.

Addiction will definitely cause your finances to go down hill. Whether it is gambling, alcohol, drugs or even shopping it is money that could be spent on necessities. I have seen people do drastic things to get money to indulge their addiction and it will put a strain on your finances and could land you in jail. There are many programs available today that can help you learn how to deal with the emotions that you are trying to suppress while you are practicing your addiction of choice.

There are other reasons that you may find yourself in debt. These are just five the may be the cause of your financial hardship. Before you can change your financial situation, you have to identify what is causing it. Once you have identified the problem, it will become much easier to formulate a plan to solve your financial crisis.

Where Can You Find Extra Money?

Posted under

The secrect to paying your debts down quicker is going to be in finding extra money. You can do this by having extra money coming in or by having less money going out. This article deals primary with having less money going out. Before you can have less money going out, you have to know where your money is going.

I suggest developing a tracking system. There are journals made especially for this purpose, but since we are trying to save money, something as simple as a pocket size notebook will work.

Record every penny that you spend and where you spend it. This will make it easy to spot spending trends. How much money do you spend on eating out and other types of entertainment? This is a good place to start. How much money will you be able to save by packing your lunch once or twice a week or by cooking at home one or two evenings a week? Most people are shocked by the amount of money they spend on entertainment.

Some other places you might want to look for extra money are your cable bill and your cell phone bill. It seems like everyone has these luxuries. Can you do without either one of these items? If not, look at the extras that you are paying for. Could you do with less cable boxes or a smaller, less expensive cable package? If you have to have a cell phone, do you need a land line or can you do without the land line? Can you reduce the cost of your cell phone package? Text messaging and photo services can get to be very expensive.

Insurance is another place to look to save money. Raising your deductibles can save money. If you are fortunate enough to own a car that is paid for, you may want to carry just liablility insurance on your car, depending on its value.

Buying things at garage sales and thrift stores will also save you money. Shopping for good deals can be a lot of fun. You may even be able to find items that may have a higher resale value on internet auction sites. That brings me to all that unwanted junk that you have in your garage or attic. That can also bring you extra money through auction sites or garage sales.

The final tip I have for saving money is to buy generic or store brands. Most of these items contain the same ingredients as the name brand and have a lower price. I have been doing this and in most cases have not noticed a difference in quality, but it has saved me a lot of money.

These are just a few of the ways you can find extra money in your budget. With a little bit of effort, I am sure you can find others. Challenge yourself to find ways to save money and you will notice your debt decreasing and your finances becoming more under control.

Steps For Eliminating Your Debts

Posted under

Eliminating your debts is not extremely difficult if you are willing to formulate a plan and stick to it. The first step is the easiest. Stop creating more debt. If this means cutting up your credit cards, do it. Do not close them. This will lower your FICO score.

The second step is to list all of your debts. Include the balance, interest rate and minimum payment. The second half of this step is to rank your debts in the order they will be paid off if you make only the minimum payment. For instance, if you have an account that will be paid off in 6 months, 22 months, 18 months and 9 months, The 6 month account should be at the top of the list and the 22 month account at the bottom of the list.

Some people say you should pay the account with the highest interest rate off first, which is an acceptable method of ranking your bills, but the newest way of paying them is to eliminate the one with the shortest pay back time first and keep moving down the list. There are two reasons for this. The first one is that people tend to stay motivated as they see progress. The sooner you are able to cross the bills off the list, the faster you will see progress. The second reason is that the fewer number of bills you have the less likely you are to accidently overlook one or pay one late.

The next step in the process is to figure out where you can come up with an extra 10% of your gross income to put towards paying your debts. This money can come from reducing your expenses, increasing your income or both. A lot of people think there is nowhere to cut their expense, but if you look you will find it. Both cable and cell phones are not considered necessities. Your answer may be as simple as working extra hours each week or getting a part time job. There are more options than you think when it comes to finding extra money.

This extra 10% will go towards paying off your first bill, while you make minimum payments on all the rest. When the first bill is paid off, the money you were paying towards it will go towards the second bill on the list. This will be in addition to the minimum payment you are already paying on the second bill. You will follow this plan until all of your debts are paid. Consumer debts can usually be paid off in 3-5 years.

Once you have paid all the debts, it is time to take the money and look in to a plan for your future. This is the part of the plan that is going to get you to fianancial freedom.