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Understanding Debt

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Debt liabilities are not fun to deal with, yet they must be dealt with swiftly in order to maintain a reasonable organized lifestyle. Debt problems can cause serious turmoil and heartache in your life. Owing money and being charged excessive interest can burden anyone and it happens to the best of us.

Understanding debt and how to deal with can give you a huge advantage to help eliminate your debt and become a smarter consumer saving you time, money and unwanted stress. If you are burdened with debt or simply looking for a logical and effective solution to eliminating your debt this website will help you in many ways. Please read the following information and click on the informational links to help you understand and solve your debt issues.


Know where you stand

First and foremost, you must assess your situation. Spend some time organizing your finances. This includes everything. Your debt (not only current debt but also debt that is past due), income, expenditures, savings etc….

Create a complete organized list of your creditors, balances, payments, interest rates and fees. Obtaining your 3 bureau credit report should be the first thing you should do to find out how much you owe. Most credit reports will have a detailed list of all accounts current and delinquent. It may not be entirely accurate; but it may show you debts that you are unaware of. (Go through your files and search for any and every possible debt because it is imperative that you have a complete list.)

You must also take into account monthly bills such as rent, mortgage payments, vehicles payments, utilities, subscriptions, services, insurance, groceries, taxes etc. Then, calculate your income including supplementary income, bonuses, commissions and monies owed to you. Once you have calculated your balances, expenses and income it’s time to research your options to figure out your best solution to digging yourself out of the hole you got yourself into. Many people stick their heads in the sand and hope that their problems fix themselves. This is definitely the wrong thing to do; you must already know it, otherwise you would not be at our website.

Create a plan of action

Your plan of action does not need to be galactic, rather a small step in the right direction. Prioritize the debts by comparing and organizing them by understanding the urgency of which they need to be paid. The urgency factor is usually the most difficult factor because there is only so much money to go towards paying each debt, many payments will have certain payments that must be made and everyone’s situation is unique. There will be a lot of thought required to accurately target specific debts.

For example:

  • Secured debt - Priority 1

  • Account with legal problem - Priority 2

  • IRS debt - Priority 3

  • High interest rate account - Priority 4

  • Payoff family member loan - Priority 5

  • Account with low rate - Priority 6

  • New account in collection - Priority 7

  • Old account in collection - Priority 8


You will need to focus on your highest priorities first. If there is enough money to make progress; you're doing great and you will eventually pay them off and continue down your list of priorities.

If there is not enough money to go around or keep up, your problem is more serious and you must take immediate action:


Reduce unnecessary expenses

In a perfect world you can easily stop spending money, make more money and save money. It’s a cold world and that is usually not the case but with some serious effort and discipline you can accomplish financial freedom. Stop spending, be cheap! I know it’s easier to say then to do. You can start by putting any credit cards you have in your safe or just destroying them all together. Attempt to reduce or eliminate extra bills like subscriptions, entertainment (cable, internet, cell phones or plan features, etc…..) Make an conscious effort to use less electricity, buy less expensive brands, eat leftovers, spend less money. Ask creditors to reduce or waive membership fees, high rates or finance charges. Think real hard and I’m sure you can find ways to trim off many if not all unnecessary daily costs of living.


Make more money

Everyone wants your money and no one wants to give it. If you have too much debt, you either spend more then you make or you don’t make enough to spend. There are many ways to make more money. If you are able to tackle another career or job in addition to what you are doing now, do it. A larger income will ultimately improve your situation.


Weigh your options

There is no easy way out of paying off debt unless you have the money to do it. Companies advertise all types of programs, gimmicks and ways for you to easily pay off your debt. Unfortunately, regardless of all the hype there are pros and cons to everything. Just to name a few……………

Home Equity Loan

  • Pros : Pay of all your debt, one payment, lower rate

  • Cons : Trading interest for interest, longer term, closing costs, you may need that equity later

    Debt Settlement

  • Pros: Pay a fraction of what you owe, may save you 40%-80% of principal, get of debt faster

  • Cons: Not guaranteed, will hurt your credit, possible legal problems

    Debt Consolidation C.C.C.S.

  • Pros: Lower your rates, out of debt faster, one payment

  • Cons: Not guaranteed, will hurt your credit, all creditors do not accept


  • Pros: May eliminate some or all of your debt, will stop creditor harassment or lawsuits

  • Cons: Will seriously hurt your credit, may loose assets, may not be eligible or work out the way you planned


Take Action

Once you have decided to follow a specific plan of action, you must stay focused and on course. Remind yourself as often as possible that if you ever want your situation to improve you must be disciplined follow your plan to reach your goals. If you have difficulty with this step, contact us for a free credit and debt analysis to help you better understand where to start.

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