The sizeable debt problems in the UK and USA are well documented and are growing so quickly that quoted statistics become quickly obsolete. In Ireland, the issue is a growing problem too, and in all 3 countries, charities and government sponsored bodies set up to handle debt problems are over run with enquiries.
The credit industry and their relentless lending, collection and recovery methods created a debt management solutions industry where companies represent their clients to creditors in return for a professional fee. These debt management companies can provide debt consolidation counseling, and if chosen carefully, can be very helpful and professional.
Our lifestyles are dominated by borrowing and servicing debt, finance charges and fees.
The Dangers Of The Debt Spiral
The Debt Spiral starts off when a new credit card arrives in the post. Most people believe that because their credit rating ‘passed’ the lender believes that they can afford to have it, why else would it have been issued? So false authority is given immediately to a piece of plastic and the belief “It’s all right” is seeded.
Constant usage seeds a habit, then a behaviour until clearing the monthly balance becomes difficult. The next downward stage is to make part payments, and finally only the minimum payment each month. Interest on Interest quickly compounds and the minimum payment does not make any significant impact on the balance. This gets repeated on average over 3 of 4 different cards, until the average debt payments become a burden.
Then in that situation, a life event happens and the money funding the repayments stops. Yet the interest, demands and bills are relentless – building and growing. Matters at this stage become desperate.
How To Get Out Of A Desperate Situation
There are a number of options, which largely depend on the personal finance statement. The first thing to do is grab a clear hold on the money in and the money out. Consult the personal finance budget software online and make lifestyle adjustments.
As things deteriorate, renegotiate with each creditor for breathing space, or seek professional help from a debt consolidation counseling centre who can walk you through all sorts of tools. Tools like a debt snowball calculator, an affordability calculator, financial goal setting and a range of insolvency options to suit the circumstances.
How To Become Debt Free Forever
Common sense dictates that living within the money available each month is the way to do this, yet so many do not. The first task is to create some ‘wriggle’ room. Pay off the most expensive debts with as much as is available to do so, then transfer to the next and the next until it is done.
Next, turn all these repayments to the capital on the mortgage and it is entirely possible to become debt free in less than 10 years, and owe nothing.
Why Your Parents Were Wrong About Debt
Previous generations didn’t encounter the credit culture we all live in today. Their values are still worth following in that if you couldn’t afford it, you didn’t get it. However, debt can be harnessed and managed if understood properly. This issue isn’t debt, it’s unmanagable debt.
Subscribing to a money management system, like the kind provided by personal finance budget software online is an easy way to keep track on money. With the right tools, debt, charges, and fees do not need to be things we fear.