Effectively Dealing with Debt PDF Print E-mail
Written by Chris Blanchet   
Wednesday, 10 June 2009 10:38
So many people cite personal finance problems as a leading cause of divorce and long-term, debilitating stress that it is rather surprising so few products are available that help people manage this important aspect of life. As well, given the severity of such problems, it stands to reason that dealing with financial problems needs to be done effectively. This will not only allow you to improve your own, financial and mental health, but will allow you to avoid dealing with difficult debt collectors.
by ChrisBlanchet


So many people cite personal finance problems as a leading cause of divorce and long-term, debilitating stress that it is rather surprising so few products are available that help people manage this important aspect of life. As well, given the severity of such problems, it stands to reason that dealing with financial problems needs to be done effectively. This will not only allow you to improve your own, financial and mental health, but will allow you to avoid dealing with difficult debt collectors.

As an initial step, it is recommended that you calculate your total debt level by organizing your unpaid bills and arranging them from the smallest amount to the largest. Next, decide the amount that you are able to pay (extra, preferably) each month. The most essential thing is to balance your budget on a monthly basis. For a longer term plan, you can prioritize your debt based on interest rate, focusing first on the higher rate debt and graduating to lower-rate debt as the higher priority debt is paid out.

Debts that need to be paid immediately should always take priority. If they remain unpaid, the creditors have the ability to take severe action against you, which is something you do not want. Past due rent and mortgage payments are examples of ultra-high priority debts. If you are seriously past due and cannot repay any debt without risk, consider delaying payments until a full budget has been completed, which we discuss next.

Once you have taken care of the immediate, high priority debt, the urgency level will drop. The next step in dealing with debt and managing your personal finances will be to review and refine your budget. By completing a budget that measures your monthly expenses, you will know what is left as "extra" which you can use to repay debt on a more consistent basis. Another big advantage with a budget is that it allows you highlight ares where spending can be curtailed even further, allowing you to save even more money every month.

If you are far past due, one way you can start dealing with debt is to talk with your creditors. Once you have completed a budget and decided the amount that you can afford to pay each month, you should negotiate with your creditors (if your financial situation warrants it) and agree on an amount that you can repay each month. You can either interact with them over the phone or write them a letter mentioning about your current financial situation.

With lenders taking a more active role in responsible lending practices, nearly all of them offer free, third-party services to people who are going through a rough patch. When dealing with these third-party services, you will gain valuable knowledge and tips about how you can do a better job at dealing with debt and personal finances. These services are a must if you are having trouble getting through each month or if you feel stressed about being unable to overcome your debt.

These are some of the most general ways for dealing with debt and handling personal finances. Of course, every situation is unique, making it difficult to make generalized recommendation. One recommendation includes visiting sites like Help Fix My Finances.com to work through an unique financial plan.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Chris Blanchet maintains a blog about debt repayment at How To Repay Debt.com. As well, his personal finance e-book Help Fix My Finances provides the basis of the website of the same name.