Do you know specifically why you’re having a big problem with debt? There can be a number of different reasons but fortunately, there is a debt relief solution for all of them. Here are six of the biggest reasons why people develop serious problems with debt.
- Too many different debts
- Not enough savings
- Out-of-control spending
- Financial illiteracy
- Not earning enough money
- Too much debt to ever get it paid off
Too many different debts
A major reason why people end up struggling with debt is because they have so many different debts that they simply can’t keep track of them. They lose track of due dates, interest charges and minimum payments until the point where they find themselves drowning in debt. There are several different debt relief solutions for this type of person. One of the most common is to get a debt consolidation loan and pay off all those other debts. This won’t do anything to reduce debts but it makes them more manageable because with this solution, you would have only one payment a month to keep track of and make.
Not enough savings
A second major cause for becoming trapped in debt is when people don’t have enough savings to tide them over in the event of a financial emergency. Sudden emergencies such as an illness, a family setback or an auto accident happen to almost all of us. If this happens to you and you don’t have enough savings to tide you over, the only option is to create debt. Financial experts say you should have the equivalent of six months’ income in a savings account to handle these emergencies. If you can’t save this much, you should have at least the equivalent of three months of earnings in the bank ready to help out.
When you are spending more than you earn you’re creating new debt almost every day. The best way to get out-of-control spending back under control is with a budget. Creating a budget begins with tracking your spending for at least 30 days so you can see where ail your money’s going. This used to be complicated and time-consuming. However, thanks to smart phone apps, this has become much easier. The best of these apps such as Mint and Expensify will not only keep track of your spending but will automatically divide it into categories so you will know exactly where you need to make cuts.
Another surefire way to get debt relief is to simply pay cash for everything. Go to your nearest ATM every Sunday and take out whatever amount of money you think you will need to get through the coming week. Put it in an envelope and then use this envelope as your ATM. Spoiler alert – when that envelope is empty, you absolutely must stop spending. And if you have multiple credit cards, you might shred all but one and use it only in the case of an emergency.
Maybe the harsh truth is that you’re just sort of illiterate financially. To put this a softer way, maybe you simply don’t know enough about money management to be a good financial manager. There’s no shame to this. Smart money management just isn’t a skill we’re born with. But there are many books available that could help as well as websites like Dave Ramsey, Bankrate and www.buxfer.com.
On the other hand, maybe you’re a reasonably good money manager but are simply not earning enough to cover your expenses. Maybe you’re currently underemployed as a result of the Great Recession. Or you might be a recent college graduate and have not been able to find work in your chosen field. In any event, your best debt relief solution is to get a second job or find ways to earn extra money. The economy has gotten better over the past year and it should be relatively easy to find a part-time job. If there is some reason why you couldn’t work a second job, there are many ways to earn extra money. The most popular of these include selling stuff on Craigslist or eBay, selling handcrafted and vintage items on Etsy or doing odd jobs.
Too much debt to ever pay it off
Finally, if you are so awash in debt you simply can’t see that you will ever be able to pay it off under any conditions, there are two ways to achieve relief from it. The first is called debt settlement. This is something you could do yourself or you could contract with a company to do it. Whichever you choose, it means negotiating with your creditors to get your debts reduced so that you would be in a better position to pay them off. Companies such as National Debt Relief have helped thousands of American families become debt free through debt settlement and could likely help you as well. Barring that, your only other option would be bankruptcy. While this would leave an indelible stain on your credit report for as many as 10 years, it is a way to get most of your unsecured debts discharged. The most popular form of bankruptcy for individuals is a chapter 7. It will eliminate unsecured debts such as credit card debts, medical bills, personal lines of credit, personal loans and even business debts. However, not even a chapter 7 bankruptcy can free you from paying alimony or child support, paying off student loans debts, lawsuits and debts obtained through fraud. It will not also discharge secured debts like a mortgage or auto loan.