Many are the people who, at least once, have had to face a financial crisis, either because of unemployment or health problem or simply because they overpaid and lost control of their debts, which now drown them.
According to a basic financial rule, the payment of your debts should not be greater than 30% of your net income since otherwise, you could fall into a situation of insolvency.
Have you been indebted at some point in your life?
If you are in debt and this has become a situation that overwhelms you, causes stress, and you lose sleep, do not despair because getting out of debt is not easy. Still, you can always overcome discipline and planning with discipline and planning them. The most important thing is that you recognize that you are in a debt problem and do not wait for your accounts to be sent to a collection agency.
And is that being indebted is not always bad. However, it sounds strange; there is also good debt and is what you allocate to increase your assets, for example: buying a house, remodeling your home (which gives more value), the acquisition of a car, etc.
There is no universal plan to get out of debt, and the strategy should be under your situation, so in Protect Your Money, we want to make some recommendations for you to take the one that best suits you:
List your debts
Take out your account statements and make a list of all your debts. Write the name of the card, the total balance of the debt, the interest rate, the minimum payment, and the payment deadline. For this, we can suggest two formats:
- Place first the debt with the highest balance and then the rest in descending order. Concentrate your efforts on paying the highest debts, pay more than the minimum, and the other destiny accounts at least the minimum payment. Do not stop making monthly contributions to keep up to date.
- Order them according to the highest interest rate. In this way, you will dedicate the largest amount of money to liquidate the most expensive debt. Without a doubt, this is the best strategy in financial terms since you will first settle the debt that generates the most interest.
Create a budget
The first step to take control of your financial situation is to know how much money you spend, to then define the amount you can spend to pay your debts. First, make a list with the total amount of your monthly income, then fixed costs (rent, tuition, gas, electricity, telephone, etc.), and finally variable costs (transportation, entertainment, clothing, shoes, etc.).
Establishing a detailed budget that accounts for all your expenses, however small, will also allow you to determine where you can cut them. The most advisable thing is that you start by reducing the tastes and unnecessary expenses, without this, you will stop having a good time, it is not that you do not spend, just do it in moderation. For example, you can reduce the number of times you go to the movies or eat, cancel pay television or reduce your mobile phone plan.
Pay more than the minimum
To get out of this complicated situation as soon as possible, you must allocate as much money as possible to the payment of your debts, and it must be enough to cover the minimum payment and a little more.
Consolidate your debt
This option allows you to group your debts into a single account. Check which bank offers you better conditions (CAT, lower interest rate, etc.) and ask you to transfer the balance of several credit cards to a single plastic, in addition to having greater control of your payments, this will allow you to save commissions annually. Not all financial institutions offer this benefit, so ask at the bank of your choice if you manage the program and under what conditions.
Save the cards
If your goal is to stop borrowing, avoid using credit cards at all costs. Leave the plastics stored in a safe place, or if possible, destroy them to eradicate the temptation to use them and get used to making all your purchases in cash.
Restructure your debt
Compared to consolidation, the restructuring seems at first glance more advantageous because the creditor institution can reduce the amount of your debt and even eliminate the interest generated by it. However, the downside is that it will leave bad records in your credit history, so it will always be better to settle the total of your debts.
Request a fixed payment plan
This option allows you to “lower” the amount of the payment you must make each month; the benefit is that the interest on the debt will no longer generate interest. This facilitates the debt payment in a much shorter period than if you only made the minimum payments. Usually, the Financial Institutions handle terms that go from 6 to 60 months. It is important that once you establish this plan with your creditors, do not use your cards again, since otherwise, you will increase the amount of your debt, and you could fall back into an insolvency situation.
Make your card your best ally
Credit cards are one of the best credit options if you know how to handle them since they allow you to finance up to 50 days without paying a peso of interest. In addition to this, they offer you some benefits such as generating points with which you can pay your annuity, obtain airline tickets or have travel insurance. In addition, they allow you to pay for services with your home, thereby saving you the transfer to a branch.
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