When to Seek Help With Reducing Credit Card Debt
With literally thousands of “debt help” companies flooding the internet, television, and radio with advertisements, it’s not uncommon for those of us in debt to begin thinking we need assistance in dealing with our finances. However, it is important to remember that most of these companies are more interested boosting their own profits than in helping you find the best method for reducing credit card debt.
As a result, it can be quite difficult to know when you can handle your debts on your own and when you should seek outside help. Here are a few keys to help you determine whether or not you should consider seeking that assistance.
Budgeting and Tracking Spending
The first and most important step, and the one that most of us dread the most, is tracking spending and drawing up a household budget. This can be very tedious and annoying for many of us, but it is mandatory for you to know how much money you have coming in and going out, and where that money is going.
Without this important step, you have no real clue what shape your finances are in or what your best options are to improve them. You don’t necessarily have to track every month, but make a real attempt to track every penny for at least a month or two if you want to get a real sense of your personal finances.
If you hate tracking everything by hand, there are some tools such as quicken or mint.com which you may find quite helpful.
Positive or Negative Budget?
Total up all of your take home pay, or your income after all of your taxes and deductions, for your household. Next total up all of your expenses, including your mortgage or rent, car payments, groceries, gas, other bills, and anything else that you might spend your money on. What are you left with?
Some of you will be left with a negative number, meaning you are spending more money then you make. You may be wondering how that is possible: if you are using credit cards or any other types of loans, you are borrowing money to cover your deficit!
If this is the case, take a good look at the budget and see what changes you can make. What expenses can you cut back on? Can you increase income or make any extra money? If you cannot balance your budget, it is probably a good idea to seek some outside help. Read on to the end of the article for information about where to turn to for help.
If you actually have a surplus every month, the first thing you’ll want to do is double check the budget! If the surplus is very high but you feel like money is usually tight, you may be leaving out some expenses. Remember, if you are showing a surplus every month, then you should technically have that much money left over to save every month. If that’s not the case, you are probably leaving out or underestimating some expenses.
Do I Need Assistance with My Debt?
Some of you will have a small surplus leftover in your budget every month. If you have not budgeted in for savings, then this surplus is probably usually spent on unexpected expenses and emergencies. If so, you should proceed as if you have a negative or break even budget. Better yet, try to rework your budget to build in savings!
If your budget is fairly tight, or if you can only afford the minimum payments on your credit cards, it’s time to take a closer look at your statements. What are your interest rates? If they are high, then you will want to get lower interest rates so that you can pay your debt off faster.
If you have high interest rates and cannot get them lowered on your own, then you may want to seek help from a non profit credit counselor as well. Keep in mind, however, that this option should only be used for those who have a tight monthly budget. If you have sufficient extra cash to go towards your credit card debt, you’re probably better off paying it on your own.
Where to get Debt Help
If you determine that you do in fact need some help in paying off your debt, the best place to start is with an accredited, non profit credit counselor. Your best bet is finding a Consumer Credit Counseling Service office through the NFCC. You will still want to do your homework before working with a specific agency, but CCCS agencies generally have a good reputation and are all accredited non profits.
A good credit counselor will look at your entire financial picture, including your budget and debt. The counselor should also help you see if there are any changes you can make to your budget to help you out.
Finally, for those who need the extra help, the counselor can place you on a debt management plan, which could help lower your interest rates and get your debt paid off much faster.
However, a reputable counselor will not try to give you a “hard sell” on a debt management plan. He or she should also discuss any other options you may have, including balance transfers or loans, paying debt off on your own, debt settlement, or bankruptcy.
The key first step in getting out of debt, no matter what direction you wind up taking, is getting a good sense of where you are right now. Tracking your spending, creating a budget, and tracking your credit card and other debt is the way to get started.