Debt and finances is all we seem to be thinking about lately, given the economic crises and recession that the whole world is living through. Sometimes I feel however that we are very prompt at directing our pointing finger to others such as banks and the government, when we should first look a bit at what we ourselves have been doing.

In this day and age unfortunately, materialism is the order of the day. Everyone cares about getting what they want and doing what they feel like, without first considering how this is going to effect their financial situation. We tend to overuse credit cards for purchases, and take unnecessary loans even to take a vacation!

Attitude

The first thing you need to do if you want to start managing your debt in an earnest way, and with the intention of not falling again in the trap, is a change in attitude. You should try and pay cash for all your purchases instead of using credit or store cards. This way you will know exactly how much from your salary is remaining at the end of the month - if any. I can assure you that if you take a positive attitude, and be serious about your situation, you would have done the first and very important step to start managing your debt.

Consolidate your Debt

If you already have more than one loan, on which you are paying a considerable monthly payment, then you should consider consolidating your loans. This would mean combining all your loans, on which you are paying diverse monthly payments, into one loan that would be larger in amount, and maybe spread over a longer period of time, depending on your situation and age. By consolidating your loans, you will be paying off only one loan, this freeing a good chunk of salary that you might use more efficiently elsewhere, thus getting a breath of fresh air.

Normally the types of loans that are consolidated are personal loans, unsecured loans, credit card balances and store card balances. The new loan would normally have a lower rate of interest, so you will be saving lots of money! This service is widely available nowadays, and appropriate counsellors can provide you with excellent advice on the matter. Definitely a thing you should consider.

Debt Settlement Programs

Given that nowadays most people are drowning in debt, companies are offering various debt settlement and debt reduction programs, especially to help you get rid of your credit card balances sooner and in a cheaper manner. The credit card companies will come up with a fixed monthly repayment program, at a good interest rate, that will surely save you lots of money on interest rates. Sometimes it is quoted that you may save up to 40% of the money you would have to pay to get rid of the credit balance, when doing so without the program.

Don't take more loans!

If you're already struggling by the end of the month to make it with your salary, don't take new loans! If you have consolidated your payments into one loan as we have discussed above, don't get any funny ideas in your mind, and use the ‘freed funds' to take new loans! If you have paid off your credit card, don't fall into the trap and pay with it again, not even just until the salary is credited into your account. If you want to get something, then pay cash for it. If you can't then it means that you simply cannot afford it!

Plan and Budget

When you fail to plan, you are planning to fail. Set up any plan, and set yourself a realistic target that is achievable. Budget! You should know where every penny you earn is going, and you should be able to budget how much you will spend. A good budget will spread your salary in an efficient manner, such that it leaves something for food and entertainment, enough to pay the bills, as well as something to be put aside as savings.

Yes savings! If you save, then when you need to get something you will not need to resort to loans. First you should save, and then you should purchase the object that you wanted. This is how it should work. The live now pay later approach is exactly what has probably brought you in a tight situation right now.

Think Smart

There are two ways in which you can go about solving this situation. You can either ask for professional advice and talk to a professional debt counsellor, of try and work out things yourself. Study your loans well. Look at the interest rates and the balances.

If you want to get rid of your debt, you should start from the loans that are more expensive. By expensive I mean the loans on which you are paying a higher rate of interest. Credit cards are normally a perfect example, as are overdrafts, which normally are the type of credit, which attracts the highest interest rate, since it's on demand credit.

Next look at the balances. Focus on clearing the smallest loan i.e. the loan that has the smallest balance. This way you will also rid yourself of yet another monthly payment. When it comes to the monthly payments, don't just increase the payments on all your loans, because this won't serve the purpose of closing the loans before. This action will only make you struggle more and more.

Bankruptcy

Filing for bankruptcy is a way that may get you out of debt really fast. However this should only be used in extreme cases, and as the last resort. You must be aware that this is not a game, and filing for bankruptcy has lots of negative connotations and implications. Therefore before taking this final step, you should always consult your lawyer, and discuss with him or her, whether this is really a good idea.

Conclusion

As you can see the list is long, and I hope that you have found it interesting and informative. I would like to add that this is not however exhaustive. Try to think of other things yourself, and see what works for you. After all as I said in the beginning, it is all a matter of attitude.

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