Do you know that billions of people around the world could not manage their personal finance well because they are so plunged into financial debts? In fact, it is one of the major causes of personal bankruptcy filings! If you are one of those people whose balances on their credit card accounts are through the roof, then you are on the right page because this article will teach you things that you should know to manage your personal finance and get rid of your debts.
- The first step involves developing a budget. The very first step towards taking control of your financial situation, reducing your financial debts, and managing your personal finance well again is to develop a realistic assessment of how much you take in and how you much you spend. You may start by making a list of your income. Then, create a separate column for the list all your "fixed" expenses such as rent, mortgage payments, insurance premiums, and car payments. Next, create another column for all varying expenses such as recreation, clothing, and entertainment. Writing down everything is a very good way to track your spending habits, identify the necessary expenses, cut down on the unnecessary expenses, and prioritize those with utmost importance. Your ultimate goal here is to make ends meet and of course to reduce your financial debts.
- The next step is to contact your debtors. If you are having trouble budgeting and making ends meet, then your next step is to contact your creditors. Explain to them why it is difficult for you and try negotiating with them about a modified payment plan that can reduce your monthly payments to a more realistic and manageable level for you.
- Don't forget to deal with debt collectors. If you are already in financial hot water, then your accounts must have been handed over to debt collectors. When you are already at this point, you have to understand the "Fair Debt Collection Practices Act". This is the federal law that states the manner and time a debt collector is allowed to contact you. While there is a federal law protecting you from harassment of your debt collector, you should be nice enough to deal with them. Hiding from them is not a good idea since failure to pay your debts will be reflected in your credit score.
- Managing all your loans is also very important in getting everything in the right track. Your financial debts can be secured or unsecured. Secured debts are often tied to assets like your house for your mortgage and your car for your car loan. If you stop paying these loans, lenders can foreclose your properties or repossess your car. Unsecured debts on the other hand are not tied or linked to any asset and these include most medical care bills, credit card debts, signature loans, and other debts of these types. If you really want to reduce your financial debts, make sure you schedule your payments to both your secured and unsecured debts.
- If you find steps 1 to 4 difficult to accomplish, then it's time to get help from a credit counselor. There are many non-profit credit counseling organizations that can work with you in finding solutions to your financial problems. Credit counselors can advice you on how to manage your personal finance, help you in developing a budget, and offer free workshops and educational materials.