With the new year comes new goals and a new perspective. This outlook should apply to your financial world as well as other elements of your life. But before you start making drastic cuts to your budget and taking on a second job, here are a few debt management tips you might want to take into consideration for the new year.
Consider Bankruptcy
No one wants to file bankruptcy, but sometimes it’s the most realistic solution. One way to assess whether this is what you need to consider is to compare your payments against your debt accumulation. In other words, are you building more interest than you are paying off? Sometimes when the debts are piling up, you have to make payments that are so small that they don’t even cover the interest. If this is the case, then bankruptcy might be the best way for you to start off your financial plans for the new year.
Contact Your Creditors
Make a list of all the people and places you owe money. Contact them and find out what the bottom dollar is, or rather, how much they’ll accept as payment in full. You can even let them know that you are trying to come up with a financial solution that works for everyone. Don’t be fooled by the ones who make you an offer and claim that it will never be available again. If they can make it once, they may make it twice. However, you should be aware that creditors who are willing to accept a fraction of the amount due to close the account also want that amount all at once. This could mean you need to make a list of all the offers first, to determine if you can afford to pay them all at once.
Pay Off Small Debts
Getting out of debt can be a real struggle. Sometimes it can even be overwhelming and feel like it will never end. When you can, pay off your smallest debts first. This will give you a sense of accomplishment so that you don’t feel completely overwhelmed by your debts. It will also reflect on your credit report so you can see some changes in the numbers themselves right away, rather than wait years until you see a light at the end of the tunnel. You save the most money if you can pay off the debts charging the highest interest rates, so make sure you take this into consideration as well.
It isn’t easy starting out the new year in debt. However, there are options you can work toward so that next year, you may start out in a better position. If you are simply overwhelmed with debt and can’t seem to get a hold of it, contact our office for a consultation. You don’t have to spend another year struggling to pay debts and dealing with the stress alone.
What are your debt management plans for 2016? Let us know in the comments!