When you’re coping with debt on a daily basis, life can be stressful. You wish there was a way out from under the heavy payments and seemingly endless payments. Depending on what type of debt you have and how far behind you are, some debt relief options make far more sense than others. In this article, we’ll cover some of the options available for coping with debt so you can make a plan to turn things around.
Start With Strict Budgeting
If you’re fortunate enough to still be able to make timely payments each month and you just want to pay your debts down, a self-help debt relief strategy is a great option. By using proven methods backed by debt reduction experts like Dave Ramsey, you may be able to wipe your debts out. Budgeting is a great place to start regardless of your situation, as the skills you develop will only help you.
Why Is Budgeting Essential?
Keeping a budget gives you a clear understanding of where your money actually goes each month, which can be truly eye-opening. Budgeting can help you reach financial goals you’re working toward like paying off debt, saving for retirement, or spending less on frivolous items.
Budgeting Strategies For Reducing Debt
Debt Snowball and Debt Avalanche
Two solid approaches to reducing debt through budgeting include the debt snowball and the debt avalanche. With the debt snowball, you pay off your debts one by one, beginning with the account with the smallest balance. Similar in nature, the debt avalanche involves paying off your debts one at a time by starting with the account with the highest balance instead. You’ll simply stick to the minimum payments on all of your other credit accounts while you work to pay down your debt, slowly becoming debt-free.
The 50-30-20 Budget
The 50-30-20 rule is a budgeting strategy that divides your income into three buckets—50% for the essentials, 30% for everything else, and 20% for savings.
Budget To Zero Each Month
At the beginning of each month, making a plan and accounting for every dollar is called a zero-based budget. This name means all spending is tracked with zero dollars left unchecked.
Additional Budget Tips When You’re Coping With Debt
Prioritize The Essentials First
Before anything else, make sure you’ve budgeted for food, utilities, shelter, and transportation to work. Once these essentials are taken care of, the rest of the items in your budget are negotiable and should be ranked based on long-term financial goals.
Trim Your Budget Further
At first glance, your essential expenses may seem out of your control. But there are often ways to save on these critical costs, such as using coupons at the grocery or even shopping at discount food stores. By saving on consumable items like groceries and household products, you can start making real progress on your other financial goals like debt reduction.
Schedule Your Budget
Another key to budgeting success is scheduling when you’ll pay for things. Sometimes essential items are discounted at certain times of the month during sales, so plan ahead to shop then even if you don’t need the items quite yet. You can also request your payment dates to be changed by many utility companies, auto lenders, and auto insurance companies.
Keep Track Of Your Progress
Don’t forget to keep track of your progress to stay motivated on your debt reduction journey. If you’re married, be sure to make time to talk about your goals and progress. Talk about how budgeting is working for you both and if adjustments are necessary. Collaborate on ways to tighten spending or even earn some extra income to reach your goals even faster. Most importantly, celebrate the small wins!
Hiring Debt Relief Services To Cope With Debt
If you’ve established a budget that you’re sticking to but still aren’t anywhere close to getting out of debt, you may turn to debt relief services for help. There are many different forms of debt relief, so be sure to get the full details of the options you’re considering. Some types of debt relief sound similar to others and terms are often used interchangeably, so double-check exactly how your debt relief program works before signing up.
Types Of Debt Relief You May Consider
Debt Consolidation
If you don’t have good enough credit to get approved for a low-rate balance transfer to a new credit card, a debt consolidation loan may be another option. Consolidation loans may also improve your credit score if your current debts are primarily made up of credit cards. You’ll also get the benefit of simple interest.
Clearing Debts Through Debt Settlement
If your credit situation isn’t good enough for a consolidation loan, it might be possible to get a debt settlement instead. In a debt settlement, you negotiate with your creditors to reduce your balances in exchange for repaying them in a lump-sum or structured payment schedule. The biggest downside to this method is that you often must close any accounts included in the settlement, which could hurt your credit score in the short term.
Bankruptcy
The most aggressive form of coping with debt available is bankruptcy. Two options are possible for individuals––Chapter 7 and Chapter 13 bankruptcy—but few will qualify for Chapter 7.
Chapter 7 is perhaps the most well-known type of bankruptcy, which is the kind that clears your debts completely without a repayment requirement. Of course, this is also the most harmful to your credit score. Chapter 13 bankruptcy restructures your debts into a payment plan that usually lasts between three to five years.
Where to Seek Debt Relief Services
When you’re coping with collection agencies and creditors demanding payments, you can turn to Alleviate Financial for experts you can count on. Reach out to our team today for debt relief that works for you.
Our seasoned staff always spends the time needed to learn your financial goals so they can create the best debt relief plan for you. Contact us today!
