5 Tips For Handling Debt

With the New Year fast approaching, it's about time you gathered up the will power and decided to make the upcoming year a debt-free year for you by doing everything you could to erase your existing debts.

Here are five tips that could help you achieve this goal.

1.) Know everything you have to know. Don't avoid the topic when the time comes for you to find about about your debts. Write them down in order of balance owed. Microsoft Excel or other spreadsheet programs will be your best friend, and some other information you could include are amount owed, interest rate on individual debts and name of the debtor.

2.) The next thing to do is to analyze - how much longer do you have to pay off your debts if you keep paying the same amounts you have been paying? And when you're making payments, pay more than the minimum, as much as you could over that amount. There are two schools of thought - one is the conventional idea that you have to pay balances in order of interest rate, while others believe you should sort the balances to be paid from smallest to largest. It's your call - as long as it works for you.

3.) Ask yourself, "Can I really afford my mortgage?" If you've been hospitalized, laid off, or had your income reduced for one reason or another and it's affecting your mortgage payments, don't hesitate to call your mortgage company.

In this event, you will most likely be offered a mortgage modification plan. This is actually simpler than it sounds - this just involves having your original terms and conditions modified until you can get a lower interest rate and monthly payments on your mortgage.

Another thing you may want to do is downsize your home so that you don't live outside of your means. This would just be a temporary arrangement until you are able to get back on your feet.

5.) Don't allow yourself to make late payments. It's common sense, but we need to mention this because there are some of us who are guilty of paying their bills without even checking them. Are you guilty of this every once in a while?

And it would be too late when you'd discover a few months later that you have been overcharged for a thing or two. Wouldn't you rather that go in your pocket than the cell phone company's bank account?

5.) Set aside some money every payday to place in your savings account. Even if it's only $20.

Awareness is the key to paying off your debt - be aware that you have debts to pay, then pay them off gradually. Don't lose hope even if your debts are rather high. There's help available if you feel lost, confused or frustrated.

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