Essential Tips About Debt Consolidation, Debt Management And Self-Discipline

Find yourself in a deep financial crisis with a huge credit card debt, enormous mortgage and an overly expensive car lease? You can’t start saving for the retirement yet, or saving, but not enough. You don’t know how you’ll get your kids through school, and besides, there are small everyday stuff, like food.

Face it, you have to hold back and stop spending, start saving. However, no one can manage all your troubles at once, not with the state of things like a deep debt hole. So, how do you start digging out? Here are some tips that will help you manage your debts better and understand the pros and cons of debt consolidation.

Tip 1 – face the problem. Psychologically it is quite difficult for some to face the problem of debt, but you have to agree that credit cards don’t go out all by themselves and don’t shop around, wasting your money on whatever they look at. The way you spend your money shows your true values. Is it the choice between a college saving and a retirement saving, or is it between saving and buying an expensive BMW? Until you realize the real problem is in your attitude, no financial specialist or a professionally worked out debt consolidation plan can help you get out of debt.

Tip 2 – spend less. Try to spend less than you earn. Spend what’s left on saving for the college, or retirement, or for paying out your debts. Ok, you say, but where can you find any surplus money in a budget that is already way too tight? For married couples, the good idea may be to start with full sincerity. Many couples have separate bank accounts, thus they have absolutely no idea what the other one buys. Track down the money you withdraw via ATM (there is a reason they call that money “liquid”!). Make a list of unnecessary purchases and cut them. Decide against major consumer purchases for the next couple of years. Go shopping with cash only, you’ll see you spend less without credit cards available to cover it all. Start using debit cards instead of credit cards. And don’t even carry a credit card in your wallet, at all. You’ll see you can survive without it.

Tip 3 – make it a rule to add to the retirement savings every month. You can use automatic transfers from your account. If you are a freelancer with unstable income, then decide on a percentage you leave out for the retirement savings from each monthly income. The less you have to spend, the less you’ll waste. Why save for the retirement first? Because you never can be sure what happens in a long life, you have tax breaks, and payroll deduction functions. Save in 401(k) to have the full match, in case you can’t have a match, save at all means.

Tip 4 – first, start paying off high interest rates credit cards. Send your checks straight to the creditors (Master Card or Visa, whatever), cover the credits with small balances first and cancel the cards. If you can get a lower rate credit card, transfer the balances there. Work out a budget on a monthly basis in order to make regular payments to pay off your credit card debt. If you know you are a shopaholic, get rid of all credit cards once you pay off your credit card debts. If you argue that you can’t live till the end of a month on what you earn, then that’s the answer – you can’t afford your current lifestyle.

Tip 5 – do not go into extremes and have your house mortgaged to pay off your consumer debts. Home-equity loans and debt consolidation loans are band-aids on knife wounds. You have to learn to live on what you earn, or else you will be deeper in debt on your credit cards time and time again. Try to understand a simple truth – you can’t get out of debt by borrowing even more money.

Tip 6 – start saving for emergency cases. However, you must determine what an emergency case is – a Bloomingdale sale or a car accident? Once you solve you compulsive spending problem, you will be able to save for emergency cases and pay off your debts at the same time.

Tip 7 – start saving for the kids’ college. Nevertheless, face the reality yourself and teach your kids to accept it – if you can’t afford an expensive school, then don’t wreck your retirement savings trying to pay for a private logo school anyway.