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How To Consolidate Debt When You Are Broke

March 17, 2019 By editor

Is it possible to consolidate debt while you are broke? Some people think that it is better to ignore their debts if they are short on cash. It is the first thing that they remove from the list because they feel like it is not a necessity.

It is true that debt is not as important as food, shelter, and other basic necessities that are vital for you to survive. However, if you ignore, it can do more damage in your life. It is never wise to ignore debt regardless of your financial situation. You need to to make a decision on what to do about it – even if it is something as severe are declaring bankruptcy.

But before you file for bankruptcy, you might want to step back a little to analyze your current financial situation first. You need to figure out if you are really broke or you are just overspending. It is easy to mix the two.

With the cost of living rising higher than the wages, it is not surprising that a lot of Americans are feeling broke. But if that feeling will cause you to ignore your debts, you have to reconsider if you are really broke or not. If you are feeling “broke” after you have spent your money on monthly expenses, you might be in a better financial position than you thought. It is possible that you are just overspending your money. If this is the case, you can still afford to pay off your debts and still survive comfortably. You just have to analyze how you spend your money.

Steps to consolidate debt when short on cash

If you are short on cash but you want to deal with your credit obligations, you can opt to consolidate debt instead. Here are the steps that you can follow to get started on this debt solution.

Create a new budget plan

Obviously, your old plan did not work. If your budget plan was working well, you will not be in this situation. You would not have accumulated a lot of debt because you would be aware of how much you can afford each month. Overspending will be unlikely to happen. But since you landed in debt, that means your budget plan is not working. Create a new one and make it a bare-basic budget plan. This will help you achieve debt relief faster. You will only focus on the basic necessities so you can use the rest to get yourself out of debt.

Calculate how much debt payments you can afford

Once you have created a new budget plan, you need to focus on how much you can set aside for your debt payments. Look at your expenses and see where you can save money. Since you created a bare-basic budget plan, you should be able to determine the funds to use when you consolidate debt. This is an important piece of information that will help you identify the debt solution that you can use to achieve debt freedom.

Choose a debt consolidation strategy

Based on your debt payment fund, you can now figure out the best way to consolidate debt. The great thing about debt consolidation is that you can restructure your debt payments. You can choose to lower your monthly payments so it will not feel so restricted. While there will be no debt reduction, you can get a new credit account that has a lower interest rate and lower monthly payment requirement. This should make it easier to keep up with your payments so you can slowly but surely get out of debt.

Stop using debt

Admittedly, this might be hard to do for most Americans. According to statistics, debt has become a major burden for a lot of Americans. 7 out of 10 have credit card debts. While a lot of them are actively making an effort to lower their debts, it is still very tempting to keep on using it. But if you really want to achieve debt freedom, you have to learn how to curb that feeling. You should stop adding debt to your balance because it will make your efforts harder.

Find ways to increase your income

If you really feel like you are broke, one way to solve that is to increase your monthly cash flow. This can be done in many ways. You can go to your employer to ask for a raise. Or you can ask for extra hours at work to earn more. You can also set up a passive source of income. Going online to look for a side gig is also a popular option. There are so many options available to increase your income. With what you are earning, you can use it to pay for your dues after you consolidate debt.

What to do if you are really broke?

Of course, the above-mentioned steps will only work if you are not really broke and just overspending. But if you are really broke, what can you do? There is still a way for you to survive your debts despite your current financial situation.

Definitely, debt consolidation is not for you. What you need is something that will reduce your balance. To do that, you need to consider doing the following tips.

Talk to your creditors

First of all, you need to speak with your creditors – and lenders if you have loans too. You want to tell them about your current financial situation. Assure them that you are willing to pay your dues but your current finances may not be able to afford to pay for everything. If you are truthful and sincere, they should be able to appreciate your initiative to do something about your debts. Other people will probably just run away from their debts. Approach them with an idea of how much you can afford to pay your debts. You can work on a repayment plan from there.

Opt to settle debts

If you cannot consolidate debt because you need a debt reduction, you should opt to settle them instead. This is something that you can discuss with your creditors and lenders. Debt settlement is the best way to avoid bankruptcy if you really do not have enough funds to pay for all your debts. This involves negotiating your debts so they will allow you to pay only a portion of what you owe. Whatever will not be paid will be forgiven. See if you can talk to your creditors to see if you can arrange this for your credit accounts.

How A Bare-Basic Budget Plan Can Help You Achieve Debt Relief Quickly

March 5, 2019 By editor

Having a bare basic budget plan is one way to achieve debt relief as quickly as possible. If you are currently in a difficult credit situation, having a typical budget plan may not be enough for you. At least, if you want to get out of debt faster, you might have to revise your monthly budget to accommodate this financial goal.

What you need right now is a frugal budget plan.

But what exactly does it mean to be frugal? Contrary to what you may believe, this is not about being cheap. You are not going to restrict your lifestyle and make yourself miserable in the process. If that is how you feel, then you are not implementing frugality the right way.

Being frugal means you are prioritizing the important expenses only. Even if you know you can afford it, you will not buy something that you know is not really needed. This is a good trait to have and it is even considered to be attractive in the dating scene.

According to one survey, 9 out of 10 Americans consider frugality as an attractive trait in a prospective partner. When you know how to be frugal, that is an indication that you know how to manage your finances properly. You make smart decisions about your money and that means you are more likely to find financial success.

A frugal person is also someone who knows their priorities. They know how to control their urges – which means they have both discipline and self-control.

Some people are naturally frugal but some need to develop their habits. If you are one of those who needs to practice, you can accomplish that by creating a bare-basic budget plan. You can try living a frugal life by following this type of budget.

How a bare-basic budget plan helps during debt consolidation

Having a bare basic budget plan is not just to help you get used to a frugal lifestyle. You can also use it to help with your debt consolidation efforts. If you want to achieve debt relief quickly, you might want to use this budget plan.

There are a couple of benefits to gain when you use this type of budget plan while in the midst of a debt consolidation program.

Helps you increase your debt payments

A bare basic budget plan minimizes your expenses. After all, you will be focusing on the priority expenses – most of which are essential for you to survive. If an expense is not important for your survival, you can stop spending on it. When you spend less, you have more money left over from your income. This will allow you to increase your debt payments significantly. When you increase your debt payments, you can get out of debt faster. This can help you save money in interest payments.

Keeps you from overspending

Living on a bare basic budget plan will keep overspending from happening. At least, this is true if you strictly follow this budget. Frugality focuses on the expenses that are important to you. This will train you to be smarter with how you use your money. It will also make you get used to living below your means. If you can limit your expenses, you will have more extra money. This is something that you can use to add to your emergency fund so you do not have to borrow money in case the unexpected happens. According to reports, there is one generation who probably understands how to do this. Apparently, MIllennials are becoming the “biggest deal-seeking generation”. By being frugal, they can save more of their money – with 16% of Millennials having more than $100,000 in savings.

Encourages you to be creative

Following a bare basic budget plan does not mean you should cut off entertainment from your life. On the contrary, you need to view this as a challenge. If your spending resources are limited, you should start getting creative with your “wants”. For date nights, you can set up a romantic date in your backyard. Or you can find an isolated place in the city to relax and gaze upon the stars with a loved one. For family affairs, you can research activities and events organized by the local government. There are so many options for you to enjoy life without spending too much money. This will allow you to find your happiness and still have enough extra money to increase your debt payments.

Teaches you how to survive a financial crisis

Finally, a bare basic budget plan can train you to survive a financial crisis. Although debt consolidation is an effective way to get out of debt, it is not always guaranteed that it will work. In case your current debt relief program does not work or your finances take a turn for the worse, you are prepared for that. Or at least, your budget plan should help you survive on very limited financial resources. You are already used to living only on basic necessities and you have practiced being creative on other things.

Tips to create a bare-basic budget plan

So how can you create a bare basic budget plan to help make debt consolidation easier? What should you do to create a plan that will make debt relief come quickly?

Here are some budgeting tips that you can follow.

Start by itemizing all your expenses and make sure to include everything – even trivial expenses like buying coffee in the morning.
Go through it one by one and cross out anything that you do not need to survive. These include eating out, paying for subscriptions and cable TV, etc.
Look over the essential expenses and see how you can still save on them. For instance, you can save on food by buying in bulk.
Make sure to include some savings for your emergency fund.
Get the sum of all your expenses. This is your bare basic budget.

While it may be contradictory to what you are trying to do, set aside a budget for entertainment expenses – even if it is just a minimal amount. Having some funds for this can help stop debt discouragement from happening. The rest of your entertainment should be free.

Tips To Repair Credit Score While In The Midst Of A Debt Consolidation Program

March 2, 2019 By editor

You can repair credit score as long as you implement the right financial habits during a debt consolidation program. Your debt payments will have a lot of influence on your credit score. It is your job to ensure that this influence will be a positive one.

You have to understand that debt consolidation will have an effect on your credit history. If you get a loan to consolidate your debts, that will increase your balance for a moment. The effect on the credit utilization rate can affect your credit score temporarily. Not only that, the loan application might reflect as a hard inquiry on your credit report. This can also have an effect on your credit score.

If your debt consolidation program has a negative effect on your report, that is okay. You can repair credit score as long as you know how to follow through with your debt consolidation payments.

How to repair credit score while consolidating debt

When it comes to credit scores, Americans are getting better at it. According to reports, the average credit score of Americans is steadily growing. For the first time, it is averaging more than 700. And it seems like might go higher after a few changes take effect in the credit reporting industry. Apparently, there will be new criteria wherein the way you manage your checking and savings accounts will influence your credit score. This means if you have to repair credit score, you have to make sure that you implement the right financial habits.

And if you think that you have to wait until you are debt free before you can start repairing your credit score, you are mistaken. If you follow through and stick to the rules of your debt relief program, you can improve your score at the same time.

Here are a couple of things that you can do to repair credit score while in the midst of paying off your debts.

Positive payment behavior

How you pay your debts will have a huge effect on your credit score. If you miss a couple of payments, that can have a significant effect on your score. This is why it is important for you to pay your bills on time. In case you missed a couple of payments, make yourself current and keep it that way. If your finances are unstable and you know that it will be hard for you to pay off your debts, get in touch with your lender or creditor (for a balance transfer). Tell them of what you are going through so you can revise your repayment plan. If they know that you will be paying less, they will not report it to the credit bureaus. This will keep it from being reflected on your credit score.

Lower debt balance

If you are in the midst of a debt consolidation program, every payment will make your debt balance go down. You need to make sure that you can meet every payment from hereon. This will make your progress steady and will be good for your quest to repair credit score. After a couple of payments, you will find your score going up. Just make sure you do not close the old cards that you consolidated. This will affect your credit utilization rate. Keep them open until after you have paid off your debts completely.

Keep old credit accounts open

As mentioned, you should keep credit accounts open even if they already have zero balance because you just consolidated your debts. This is even more applicable if the accounts are old. Keep all of them open because these will help improve your credit score. But if you want to limit your credit accounts, then wait until you have paid off a significant amount of your debts before you close them one by one.

It is important to remember that your financial management skills will not just make debt consolidation a huge success. It can also help repair credit score.

Important reminders when repairing credit score

As you work on your debts and credit score, there are a couple of things that you need to remember to ensure financial success.

This is not an overnight fix

When you are trying to repair credit scores, do not think that this is a quick fix. There is no way to improve credit score overnight. You have to be patient with this. You need to work at it slowly but steadily. As long as you can consistent, you will notice positive results. According to reports, the credit score per age noticeably rises as we get older. Apparently, we get smarter with our credit as we get older. We experience both right and wrong. We make mistakes and we learn to never commit them again. This process takes time – especially when it involves developing the right habits. This is probably why the credit score rises over time.

You can do this yourself

As you continue to repair credit score, you need to know that you have the ability to do it all on your own. You have the ability to get back up on your feet all on your own. However, there are times when you need the help of experts to guide you along the way. Starting everything on your own can be daunting and this is where professionals can make a whole lot of difference.

However, this does not mean that you should rely on them every single time. The fact that you got yourself into that situation means you have the power to climb out of it. You can research steps and even tips on how to get your credit scores up even while you are going through a debt consolidation program.

Identify the root cause of your credit score problem

As you take on financial changes to help you repair credit score, you need to look deeper into the problem. The last thing you want to do is apply a band-aid solution to deeply-rooted problems. One thing you can do is carefully assess and look inside yourself to help you identify why you needed to consolidate your debts.

To do this, you have to ask the right questions. Take credit card purchases for example where you might have been spending more than what you can afford to pay. The problem is not overspending because that could only be a result of the root cause of your financial woes. You might be spending too much because you did not have a lot when you were a kid. It may also be trying to keep up with your friends. Once you identify the root cause of your problem, it will be a lot easier to work out a solution.

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