Determining your level of debt.
Assemble all of your debts. This includes credit cards, mortgages, car payments, insurance, etc. Make yourself a spreadsheet using several simple columns such as, creditor, monthly payment, total debt, date due and one last column for priority. This is a very important step and should not be skipped. If you don't know how much money you owe, you will never be able to figure out how to pay it. Now determine if any of those monthly bills can be eliminated. This spreadsheet will allow you to determine how many dollars you will need to pay each month, and any expenses that may be able to be reduced. Rank each one of your debts starting with one and counting upwards as your most important debt to your least important debt. For example, your mortgage may be your most important debt that you wish to maintain, and your cable bill last.
Determine your income.
Assemble all of the monthly checks that you receive, and any other sources of income that you may have. This may be very easy if you receive a monthly paycheck, but not quite as easy if your employment is seasonal,or you own your own business. Make another spreadsheet if your income varies from month to month.
Take an honest look at your financial situation.
This may be the first time that you've actually had to be honest with yourself in quite a while. Can you budget yourself to be able to pay off your creditors? If you can't, who can you pay? See if you can work your way through several different scenarios until you determine what you will need to do. Some important questions that you will need to ask yourself are: 1. Are my financial problems a result of long-term mismanagement or a short-term situation? 2. Has my credit already been affected? 3. Do I really have the discipline to work my way out of the situation 4. Am I willing to live without using my credit cards? Although there are no right or wrong answers to these questions it will help you to understand why you are in this situation.
What if getting out of debt seems to be impossible? - If not go to step 5.
Bankruptcy may be a possible option. Many people do not realize that they may be able to keep their house and their car in bankruptcy. This of course means that you must be able to continue to make payments and keep current on both. Although the system is set up so that an individual may be able to declare bankruptcy without an attorney, it is much easier to do with an attorney. Either way, many attorneys offer free consultations so I would suggest you speak to one.
Do something NOW!
1. Eliminate every debt that you do not need. Yes, I understand how important that extended movie / sports package for your cable TV is - but it is not necessary! So what can you do with your spare time? Maybe start an exercise program that you been wanting to begin or work a few hours extra to earn some added money. It is time you change your life to do it now. 2. Can you sell some items on e-Bay or Craigslist that you don't need? Sometimes people are able to earn thousands of dollars from selling junk that they no longer use. 3. Review your monthly bills such as insurance, cable, Internet, cell phone, and price compared to see if you can save any additional money.
Negotiating off your debt!
You may be surprised that much of your debt may able to be negotiated. This process means that you must have money to pay whoever you negotiator or there is little use in trying to negotiate a lower amount. Do not negotiate with anybody who you can't make a reasonable offer to repay. Many people ask how it will affect their credit, and the answer is it will affect it negatively. However, by this point in time most people already have bad credit. There are companies that specialize in this type of process. However, be sure you're dealing with a reputable firm or an attorney. Do not call anyone is holding a sign on the side of the road, or uses a cell phone as their primary phone.
Chart your progress.
It is very important to know how far you've come and how far you've got to go. Getting out of debt is a difficult process, much like starting a new exercise program and takes discipline. Keeping track of your progress makes it easier to continue this difficult process.
Reestablish your credit
Once you're out of debt, you need to make sure that you're paying all your bills on time so that you don't get back into that same situation. Use your new found discipline, to manage your financials properly. If you've made it this far, congratulations!