Debt has a purpose in this world in that it can help accomplish major life goals. That exciting European tour you have always wanted to go on, or better yet, purchasing new furniture to match your swanky place somewhere in any one of Australia’s urban centres is accessible through financing. Then, you need the clothes to match the apartment, and of course, there is the speedster to race around the city.
In any far off imagination, debt can help you attain this uber-sophisticated life of anyone inhabiting the urban jungle. At the same time, though, this very same glamorous life on credit can land you in financial purgatory. However, just after you perfected your life, the bills pile up, and your life is in serious need of therapy. Fortunately, help can be found from a number of places offering financial services and through your own ingenuity.
Let’s take a look at how you can recover from a financial disaster and regain control over your finances.
Consider Consolidation Loans
Any easy way to reduce the stress associated with overwhelming debt is debt consolidation. The disadvantage to these types of loans is they typically require you not take out any more debt, and many charge fees to open the loan and pay it off early. However, there can be major advantages to consolidating your loans.
For one, consolidation reduces the financial pressure of paying bills every month. This is primarily because the loan reduces your monthly payment by combining your obligations into one loan. Having one payment with one interest rate is more beneficial than paying out on several loans with varying rates simply because you save money on interest on all of the loans. Of course, debt consolidation should be considered along with a financial plan (including counselling) to pay off existing loans simply because the point is to address the issues that caused the problem.
Institute A Cash-Only Policy
Another way to climb out of a financial disaster is to institute a cash-only policy. As opposed to going to the ATM to take out cash when needed or using a credit or debit card, budget for your expenses every week, and take out cash to pay for those expenses. Groceries, gas, and other incidentals that you use credit and debit for can be paid for with cash as well. The purpose is to establish a fixed amount of money to spend, and even if you run out of cash, it makes you aware of your expenses.
Furthermore, implementing a cash-only policy reins in any out-of-control charges to either your debit or credit card. In many cases, if you do not have the cash, you are forced to use self-discipline to save the money for the item or forgo the purchase altogether. Finally, this policy reduces the amount of money wasted in a month, and the money you do have can be used to pay on existing debt.
Track Your Expenses
Probably the best way to solve major financial issues is to find the money trail. By tracking your expenses you have good idea of where your money is spent. Start by simply saving your receipts, and then at the end of the month, sit down to calculate how much you spend on groceries, gas, dining, personal necessities, shopping, rent, and other living expenses. This can give you an idea of where most of your money is being spent, and if necessary, can be a place to begin a budget.
Climbing Out Of A Financial Mess
The discipline to track spending and to use a cash-only policy minimises the damage of out-of-control spending causes. In the worst-case-scenario that you have to consolidate debt, many of these programs come with counselling that addresses the root causes of disabling debt. While climbing out of the hole of overwhelming debt can seem like climbing a mountain, like mountains can be conquered one step at a time, debt can also be conquered one payment at a time.
