How to Get Through Tough Times without Getting Buried in Debt

Financial difficulties are a part of life. Loss of employment and unexpected medical bills are just some of the causes of getting in debt. Even if you have a business, client slowdowns and random expenses will eat away at your profits. If you’re fortunate enough to amass some savings, riding out the tough times will be a lot easier. If you don’t have the resources, it may look like the only way to get out of debt is to rely on borrowed money and/or explore debt settlement options to get through these dire times.

However, resorting to debt can make the tough times worse over a longer period of time. While it can be tempting to seek instant relief from your financial troubles, you could end up worse off if you don’t address your situation and get some debt help.

While there’s nothing wrong with incurring debt per se, things can get out of hand if you’re not careful. Having legitimate reasons to borrow money, using it judiciously and having a solid plan on how to pay it back will help you steer clear of financial pitfalls. Here are a few tips on how you can navigate through a financial crisis without getting buried in debt:

Accounting for Earnings and Expenses

The first step in getting through tough times is to thoroughly account for all your income and expenses. Know exactly how much you owe your creditors and when your payments are due. When do you receive your pay check? Do you have alternative income sources? What are the terms of your financial obligations? These are questions that you need to know the answers to so you can nurse yourself back to financial health.

This also allows you to understand how much debt you currently have and how much more you can incur. Keep in mind that smart decisions can only be made if you have accurate information on hand.

Follow a Budget

A budget is a simple, written plan of your allocations for expenditures. When creating your budget, be mindful to put an ample amount of funds for necessities and cut down on your luxuries. Food, water, home mortgage and electricity are the obvious necessities that should be allocated in your budget but be mindful of other services you may not need. Your internet subscription can stay if it’s necessary for your line of work and important communications. However, Cable TV can probably go until you’re financially stable again.

Eliminate unnecessary expenses such as club memberships, online subscriptions that have nothing to do with work, hobbies, expensive food and drinks, etc. More often than not, you’ll find that there are things that you’ve been spending on that you don’t really use and can live without.

One important point to make here is that debt payments should be part of your necessary monthly expenses. One of the best ways to avoid high interest payments is to ensure that your debt doesn’t increase. Do not just make the minimum payment if you’re able to pay more. Making minimum payments mostly pay off your debt’s interest with little impact on your principal balance. If you find that you have extra cash, the best investment for it is to pay off your debt.

Don’t Get Into More Debt

Credit cards are a modern day convenience. Sometimes, they’re just too convenient and paying through them becomes a reflex action. Not only does this increase your debt, researchers found that shoppers with credit cards and gift certificates are more likely to make impulse purchases. During these tough times, be aware of how you are and think about if you really need that product or service before making any unnecessary purchases. A good rule of thumb is if you can’t pay for it with cash, don’t buy it.

Using cash for your expenses makes you consciously keep track of your available cash – helping you to keep within your budget. Keep just one credit card and only use it in an emergency. If possible, transfer the balance of your credit cards to a zero interest account. Read the terms and conditions carefully as the zero interest is normally for a limited time only and may have a very high interest rate after that period.

Be very careful when considering taking out a loan to pay for another loan. It may be a good idea if the new loan has a lower interest rate, but use extreme caution and read through the terms and conditions. If done incorrectly, this can lead to getting into more debt.

Ask for Help

If you find that you’re slipping further into debt and are unable to make payments, it may be time to get help. You’ve probably heard of companies that offer to get rid of your debt. While this may sound too good to be true, there really are companies that can help you become debt free.

How much they can help you in reducing your debt will of course depend on your circumstance. It  could take as little as a few months or more to find the right solution, but at least you will have professionals helping you along the way.

Debt relief companies assist people in times of financial distress by helping them properly allocate their income for things that matter most. A debt negotiation company can help you lower your debts, negotiate with creditors and work on debt settlement plans to get you in the right direction towards debt relief.

There’s no magic wand to make your debts disappear and you should beware of companies that promise that when doing your research on debt relief services. While there are companies that are truly helping, there are also unscrupulous companies that prey on unsuspecting debtors.

Know as much as you can about the company that you will be trusting. Always check their methods, how much they charge and when they’ll charge. The wrong company can get you into a lot of trouble and send your debt spiraling out of control. Getting the right company to help you with your debts can offer relief during the tough times and set you on a more sustainable financial path.

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