Let’s face it. In this age of post recession hangover, almost all American households are crumbling under the stress of insoluble debts and frantically looking for a way out of their financial distress.
According to the Federal Reserve, as of May 2011 the total of U.S. consumer debt was $2.43 trillion, whereas the total of U.S. revolving debt is $793.1 billion (98 percent of which is made up of credit card debt).
Can any conclusion be drawn from these jaw dropping statistics? Yes, for sure. The bottom line is no matter how much you make, you are bound to go into debt.
However, things can be improved if you stay alert and follow a few disciplines in your financial life from the very beginning.
To ensure your debt problems don’t overpower you, take the following steps to take control of your own financial life:
Keep a track of your credit history
Before you begin to fix your financial problems, your first and foremost duty is to get a clear picture of your current financial situation.
Secure a credit report from the three major credit bureaus: Equifax, Experian and TransUnion and comb the reports thoroughly.
If you note any inaccuracy in those reports, immediately inform the creditors and the credit bureaus and ask them to rectify it.
Maintain a personal balance sheet
List all your assets and debts and make a personal balance sheet for it. Figure out your net worth by subtracting the debts from your assets. You can take online help in this regard.
You can use free templates and other money management tool available at Mint.com. Remember, understanding your finances is the first step towards solving your financial problems.
Form a budget
- Start keeping track of all of your expenses and income.
- Check your monthly statements and credit card bills to figure out the exact amount due.
- Keep a detailed log of your expenditure will help you to locate the areas you tend to overspend. Cut back as much as humanly possible and if required, embrace frugal living for the time being. However, it doesn’t mean you should ignore your essential bills.
- Prioritize your expenses in categories such as essential and discretionary expenses.
- Make you debt payments in a timely manner, and if possible, make more than the minimum payment before the due dates.
- Last but not the least, though it’s hard to stop and think about retirement saving when bills keep climbing up, save at least 10% of your income in a retirement account and secure your financial future.
Get help and advice
If you need financial assistance, the Federal Trade Commission (FTC) is always there to offer advice on selecting credit counselors and debt management plans.
However, before signing any deal with a counselor, know exactly what services the respective counselor offers and see through the written agreement thoroughly to know the terms and conditions clearly.
Make sure the debt management company is BBB accredited and has a license to practice in your state.
Keep the aforementioned point in mind and steer your finances in the right direction.