Personal Debt Management
How does it compare to professional services?

You've made a decision about your personal debt and have decided that it requires some pro-active management. Most people assume that a credit counseling agency should be their first resort. This is not necessarily true in all cases where debt load has become a problem. Most credit counseling agencies are successful services that offer an effective means to deal with financial problems, but they may not need to be the first resort. Better financial management may be as close as simply creating your own 'personal debt management program'!

Credit agencies, counseling centers, and financial advisors are certainly the way to go when affairs are complex and reaching a critical mass where repossessions, foreclosures or even the prospect of bankruptcy are looming ... crisis intervention! If your situation isn't so dire, a personal debt management program that you establish and maintain yourself could very well solve your financial problems and save you the added expense of fees charged for credit counseling. However, you must first learn the basics and be prepared to follow through!

Your own personal debt management program can be just as effective as professionally managed plans with credit agencies and companies. No one knows your personal circumstances better than you do, and your are certainly more available to yourself than a credit agency is!

So lets look at a simple 7-step plan to get you started. It is advisable that you do additional research as well since you may discover other techniques that can assist you in addition to these seven basic and time-tested steps to achieve your debt reduction goals.

The Basic Seven- Step Plan to Get Out of Debt

1. Make a Personal Commitment ... to yourself!

This can be the biggest challenge for many people because it means giving up a portion of one's lifestyle ... the portion, usually, that is responsible for the problem. It means having the will power (or "won't" power?) to just say "no" to spending temptations, and accepting a more austere lifestyle until debt and finances are back under control.

2. Live on Your CASH ... live with the King!

This is important because it forces you to live within your available cash flow. It also requires you to keep careful track of expenditures to ensure your available funds will sufficiently look after your important needs until new funds arrive in your possession. They say "cash is King" ... the reason is simple; a King is always in control ... just as you will be dealing on a cash-only basis!

3. Make a Simple Ledger ... track the in-come and out-go!

You need to know what got you into this debt situation to begin with. You need to do some serious self-examination about this because without knowing, you'll repeat the same financial and spending mistakes. Keep track of all funds you have coming in and going out ...write it down! This will allow you to see where your money is going, where the 'leaks' are and, as importantly, do a comparison to your old habits ... you'll find it very educational!

4. Tackle the tough debts first ... a 'downhill' to your goal.

Debts incurred for a purpose, or for appreciating assets ... i.e. education and real estate respectively are usually the largest and most unwieldy. However, they are also the debts that can eventually turn into profits. For this reason these, despite size, should be the first ones addressed and the ones sacrifices are most readily made for! These debts, because they are based on 'future value' require some 'vision' since their immediate value may not be readily apparent especially during stressful times!

'Consumer debt', TVs, audio systems, holidays and 'fun time' among them, are your biggest threats because while they provide some immediate gratification, after the 'rush' the money is gone, the event is over and the TV has depreciated!. As a general rule, anything at an interest rate over 10% should be eliminated as soon as possible ... and credit card debt is TOP of that list!

5. Find a better rate ... and consolidate!

These days finding lenders to consolidate your debt at a better rate is relatively easy since the competition is so fierce. A consolidation loan can level your financial 'playing field', simplify your book keeping and take a whole load off your mind.. This is because lenders love to make money off of you and the more you owe, the more they get.

6. Plan the Work ... then work the plan!

There are a number of ways to create a plan. The simplest is the old fashioned ledger book. While this is OK, in this day and age of computers it makes sense to look into a software package designed to manage your financial situation ... many of these are simple, home finance packages that are easy to learn and operate. The value of using software is that you don't need an eraser to try out different scenarios! Literally with a click of a mouse you can explore multiple options and in doing so get a clearer picture of the short as well as long-term effects of any variation of your plan until you find one that seems to fit your needs best. Once you have established your financial plan, and can see the road ahead in terms of your debt management and pay-down, you must then stick to your plan ... "plan the work, then work the plan!"

7. Be Proud ... you've just taken positive control of your finances!

Take a look in the mirror now, and you'll see someone who recognized a problem and, instead of avoiding it, has taken a proactive approach and who has become decisively committed to his or her own financial recovery. You will also see someone who, by virtue of that decision and the follow-through action, will be very unlikely to repeat the mistakes of the past and who will eventually be debt free and in a positive revenue situation. It's all up to you!

You may also want to read information about a Credit Card Debt Management Plan that can be applied to any other form of financial obligation that you feel needs to be addressed.

Other Related Topics

Reports | Monitoring | Security | 3 in 1 | Debt Help