Making a Budget
If you’re working to cut down your debt, making a budget is an essential first step. Creating and sticking to a budget is also an important way to avoid debt in the first place. By mapping out your regular expenses you can get a clear picture of your finances and act accordingly. This section provides information and resources to help you manage your expenses and make a budget. You’ll find articles on prioritizing your debts, making a budget, refinancing your loans, surviving the holidays on a budget, managing your expenses, tips on how to avoid excessive spending, and more.
How to Avoid Debt
Avoiding debt altogether would be the surest method to ensure a secure financial future. Credit card debt tends to be the most treacherous kind of debt most consumers will manage. Some considerations about how credit card debt can help problems from developing. Follow the links below for more detail on credit card do's and don'ts.
- DON'T charge what you can't afford;
- DON'T charge food purchases;
- DON'T take cash advances;
- DON'T purchase special services.
- DO create a budget;
- DO use only for emergencies;
- DO pay the balance in full each month;
- DO pay on time;
- DO limit the number of credit cards;
- DO read the fine print;
- DO keep a record of purchases;
- DO leave your credit cards at home.
Ten Ways to Manage Expenses
Naturally, avoiding debt altogether is the most effective way to avoid financial problems, but sometimes acquiring debt is simply unavoidable. Avoiding debt and eliminating existing debt are easier when you remember and follow some simple rules for managing your finances. The following are ten simple suggestions for how to keep control of your expenses. Follow the links below for more detail and other resources.
- Make a budget;
- Avoid impulse spending.
- Limit your debt.
- Pay off debts in full.
- Keep rent and mortgage payments reasonable.
- Develop alternatives to spending money.
- Invest wisely.
- Don't cosign or guaranty.
- Obtain adequate home and auto insurance.
- Obtain adequate health insurance.
When debt accumulates despite your efforts to manage your expenses there are a number of questions that commonly arise. The most basic question is what to do about overwhelming debt. Because creditors want to have the money they lent be repaid they may be willing to negotiate with you to find solutions to a debt crisis. The degree to which you are accommodated can vary highly, but speaking to your creditors is a good starting point. The repossession of a car or foreclosure on a home are other points of concern for those with financial difficulties. These outcomes, particularly where a house is involved, may also be avoided with direct communication with the lender. Another option is to attempt to sell your home prior to a foreclosure, or ask the bank to participate in a "short sale," a system where a home is sold for less than the amount owed and the difference between the two figures is forgiven.
Other common situations include the receipt of a large utility bill. This might be due to missed payments, or on account of a leak or other defect that results in the use of an inordinately large amount of a utility. Utility companies may be willing to reduce or extend payments in some circumstances. Those who fail to pay creditors may be sued by the creditors, who can receive an order "garnishing the wages" of the debtor, meaning that the creditor can claim up to 25% of your wages from your employer to be applied to your debts. Fortunately, there are no more debtors' prisons, though you can still be jailed for debts where you have dodged tax payments, committed fraud, or refused to comply with a court order.
Get Legal Help to Avoid Debts
While making a budget doesn't necessarily require the help of an attorney, if you fall into debts that you're unable to pay back, consulting with a skilled bankruptcy attorney can be very beneficial. An attorney can help you sort through your debts and explain your options based on your specific circumstances.