No one wants to get to the point where they have fallen so far into debt that they have to consider bankruptcy as their only solution. Everyday, thousands of consumers find themselves deep in debt, and they can’t figure out just how they got there. How could they miss the warning signs? Were there steps they could have taken which could have prevented these problems? Unfortunately, many don’t know what to look for. Luckily, there are resources such as consumer credit counseling services, that can help create debt management plans to get individuals back on track and teach them ways to recognize when they are slipping out of control.
The Key to Effective Debt Management is Prevention
Reputable credit counseling services know that “an ounce of prevention is worth a pound of cure.” They advise that it is much easier to prevent a bad financial situation from occurring in the first place than trying to work your way out of financial disarray. Recognizing the warning signs early on and having a debt management plan is critical to staying in good financial shape. If you can create and maintain your own debt management plan now, you will be saving yourself from potential financial problems in the future. You can hire credit repair company during this period because of they help you in Debt management as well as improve your credit score.
The Numbers Tell the Story – How Americans are Managing Their Debt (or not)
• The American Bankruptcy Institute reports that in 2004, there were over 1.5 million personal bankruptcy filings.
• According to the VIP Forum Analysis, those who owe more than $10,000 on their credit cards (greater than 36%) have household incomes under $50,000.
• The median value of total outstanding debt owed by households rose 33.9% between 2019 and 2020.
What are the Warning Signs?
Identifying the warning signs of poor debt management planning is the first step to correcting it. It is important to be honest with yourself. Are you contributing to your debt management issues without realizing it?
Ask yourself the following:
1. Are you unable to pay your creditors on time and are starting to receive collection calls?
2. Are you living paycheck to paycheck? Do you have little or no money put aside in a savings account?
3. Are using a significant amount of your monthly income to pay toward your debt (Generally more than 20%)? (This does not include mortgage payments).
4. Do you often use credit cards or borrow money for items that you used to purchase with cash?
5. Can you only afford to make the minimum monthly payment on your credit cards? Or are you skipping some payments in order to make other payments on time?
6. Have you taken out new loans to pay off existing debts?
If you answered yes to any of these warning signs, consider seeking debt management or budgeting help from a professional consumer credit counseling service. These types of consumer credit counseling services can also help you determine whether or not behavioral issues (such as gambling or compulsive shopping) might be a contributing factor to your debt.
Do you ever spend time worrying about debt management issues? The term “financial health” can have a dual meaning. If you are constantly stressing over financial matters, it could have a negative effect on your general health and well-being. Don’t let debt management issues spill over into other aspects of your life. Always try to remember that you can remedy almost any situation, and that help is available from Credit Repair services if you ever feel like you need it.
Calculate your Debt-to-Income Ratio
This simple formula can be a big help in giving you a reference point from which to judge your debt situation. Consumer credit counseling agencies use this formula to help individuals decide the severity of their debt problems, and lenders often use this formula to decide whether they will grant or deny a loan to an individual.
To determine your Debt-to-Income ratio, simply take the total amount of monthly debt payments (excluding mortgage or rent), and divide that number by your total monthly income. When you convert the result into a percentage, you will have a number that you can use as a reference point. If the percentage is over 20%, you should take note of this and try to figure out how you can reduce the number. A reputable consumer credit counseling service is well equipped to help you develop an action plan to get you back on track and keep you from falling further into debt.
Seek Help From a Credit Repair Company
The best thing you can do to relieve some of the stress caused by financial debt is to talk to someone – never keep things bottled up inside. Talk to your friends and family members for support. If don’t feel comfortable sharing your personal financial matters with them, you can contact a professional Credit Repair Company for advice on budgeting and, if it becomes necessary, you can start on a debt management plan.
