Are You In Financial Distress?

If like thousands of other persons, you are having trouble paying your debts, it is important to take action. Doing nothing can lead to much larger problems in the future–and even bigger debts, such as the loss of assets such as your house, and a bad credit record. This Financial Guide suggests how you can get started on the road to financial freedom by reducing your debts and exercise better manage your hard-earned money.

How can you tell when you have too much debt? What if bill collectors are not calling yet, but you are having difficulty paying monthly bills? The following are tell-tale signs that you need to look closely at your situation and take action.

• Have you run several credit cards up to the limit?
• Do you frequently make only the minimum monthly payments on your credit cards?
• Do you apply for almost any credit card you are offered without checking out the terms?
• Have you used the cash advance feature from one card to pay the minimum payment on another?
• Do you use cash advances (or use a credit card) for living expenses such as food, rent, or utilities?
• Are you unaware of what your total debt is?
• Are you unaware of how long it would take you to pay off all your current debts (excluding mortgages and cars) at the rate you are paying?

If you find any of these statements apply to you, you may need to learn more about managing debt before you try to reestablish credit.

Let’s Get Started

Here are some specific steps you can take if you are in financial trouble:

1. Review each debt. Make sure that the debt creditors claim you owe is really what you owe and that the amount is correct. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the debt, contact your state or local consumer protection office or, in cases of serious creditor abuse, your state Attorney General.

2. Contact your creditors. Let your creditors know that you are having difficulty making your payments. Tell them why you are having trouble–perhaps it is because you recently lost your job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness.

If you own an automobile, most automobile financing agreements permit your creditor to repossess your car any time you are in default, with no advance notice. If your car is repossessed you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. Do not wait until you are in default. Try to solve the problem with your creditor when you realize you will not be able to meet your payments. It may be better to sell the car yourself and pay off your debt than to incur the added costs of repossession.

3. Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and healthcare) and optional expenses (such as entertainment and vacation travel). Stick to the plan.

It is recommended that you try self-budgeting before taking more extreme measures.

4. Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation or using a car sharing service rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Leave your credit cards at home. Pay for all purchases in cash or use a debit card instead of a credit card.

5. Pay down debts using savings. Withdrawing savings from low-interest accounts to settle high-rate loans or credit card debt usually makes sense.

If you own more than one automobile selling off one might not be a bad idea as such sale will not only provide you with needed cash but it will also reduce your insurance and other maintenance expenses.

6. Find out if you are eligible for social services. Government assistance includes unemployment compensation, Temporary Assistance for Needy Families (TANF) formerly Aid to Families with Dependent Children (AFDC), food stamps, now known as Supplemental Nutrition Assistance Program (SNAP), low-income energy assistance, Medicaid, and Social Security (including disability). Other resources may be available from churches and community groups.

7. Try to consolidate your debts. There are a number of ways to pay off high-interest loans, such as credit cards, by getting a refinancing or consolidation loan, such as a second mortgage. However, be very wary of any loan consolidations or other refinancing that actually increase interest owed, or require payments of points or large fees.

8. Prepare a financial plan. A financial plan can alleviate financial worries about the future and ensure that you will meet your financial goals whether they relate to retirement, asset acquisition, education, or just vacations.

For your financial guidance let the Advisors at Metro Accounting And Tax Services, CPA be your partner in the process of getting your life back on track. Call us today @ 470-240-5143.

User | 2/11/2017