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How to Recover from Crippling Debt

If you are reading this, there is a good chance that your income no longer exceeds your expenses and that you are finding that you seem unable to get ahead with your debt. You may even be using one credit card to pay off another and be using loans to help get ahead of your debt. The problem is that incurring more debt to deal with the debt that you have is only going to add to your problem in future.

Do you have a Debt Problem?

Are you living from one paycheque to the next? Are you buying perishable items on your credit card? Do you dodge phone calls from unknown numbers – it may, after all, be the bank. Do your debt repayments, excluding your mortgage, exceed thirty per cent of your income? If you answered yes to any one of these, you have a debt problem. If you answered yes to all of them, it is a pretty severe one.

Know your Enemy

You have to find out where you stand in order to deal with debt effectively. Now comes the scary part – Make a list of all your monthly expenses. Divide this list into essential expenses and non-essential expenses. Essential expenses are those that are incurred through day to day living such as rent, electricity, etc. For now, place any debt except for car and mortgage payments into the non-essential column. See where you stand in terms of essential expenses and your income. Is there percentage still quite high? How much is left over for non-essential expenses?

Cutting Back in Expenses

Look carefully at your essential expenses – do you really have to have two cars? Are you renting a house that is too expensive? Can you downgrade a little in your lifestyle to bring these essential expenses down? You may resent having to do this but it is far better to downgrade your lifestyle than to go into bankruptcy. What daily expenses do you have? Do you make your own lunch or buy it at the office? Allow yourself some room for a few luxuries but cut out as many unnecessary expenses as you can.

Make Arrangements for Your Debt

You need to have a look at you non-essential debts and work out how much you can afford to pay each. If these payments are less than the minimum monthly instalment you will need to contact the relevant company and see if they will accept the reduced instalment. You will, no doubt have to hand any cards in and will have to stick to the agreement scrupulously.

Get the Debt Down

Check on the card with the highest interest rate and target that for repayment first. Put any extra money into this card and, when it is paid off; target the next card, etc. It may take a while but debt can be managed without incurring more debt it just means being more disciplined.

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