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6 Stages Of Your Debt Relief Journey

July 1, 2020 By editor

What will it take to have a successful debt relief journey? If you are one of the many Americans who are struggling with debt, then you have no choice but to embark on this journey.

According to reports, there is an increasing number of accounts that have entered into a “financial hardship” status. If you didn’t know, entering into this status means you have acknowledged that you cannot pay your debts like you used to. You are asking the bank, creditor, or lender to allow you to change your payment terms so it becomes more affordable. You either pay a lower amount, just the interest rate, or not pay anything at all. This will be your arrangement while you are still under a “financial hardship” status.

If you think that you need to enter into this status, it just shows how bad your situation has gotten. You need to find a way to ensure that your debt relief journey will be a successful one. To do that, there’s one thing that you need to do – you have to learn more about what you will go through while you are trying to get out of debt.

6 emotional stages of your debt relief journey

Some people make the mistake of focusing too much on the financial aspect of their debt relief journey. While it is very important, it’s not the only thing that you should focus on if you want to improve your debt situation. You should also consider the emotional journey that you have to go through as you pay off your debts.

Why?

Because your debt has a huge effect on your emotions as well. You have to realize that once your emotions are involved, it will also affect your mental abilities. This is why debt can lead to a lot of stress. It can really feel like a huge burden for you. In fact, one survey revealed that more than 7 out of 10 of the respondents admitted that their finances were the number cause of stress in their lives.

So what can you do to make yourself strong enough to deal with the emotional stress that comes with your debts?

You need to understand the emotional stages that you will go through as you embark on your debt relief journey. There are 6 stages that you will go through. If you know where you are at the moment, you would know how to act and get through to the next stage.

Now let’s get to the 6 stages of your journey towards debt freedom.

Ignorance

If you are reading this, it’s possible that you have gone past this stage. But nevertheless, let’s try to understand what happens during this stage.

The first stage is when you are unaware that you have a problem with debt. You don’t know that you are already overspending and that you are maxing out your cards. This is why it’s important for you to keep a monthly budget. You should track everything that you spend and make sure that you are only spending on things that are necessary. If you know where your money goes, it should be easy for you to make decisions that will never compromise your financial position.

Denial

Once you have gone past the stage of ignorance, the next stage is denial. You don’t believe that you are in debt or having financial problems. Sometimes, people still refuse to believe even if they are shown the facts. This is just our pride getting in the way of us admitting that we did something wrong. Most of the time, people in this stage are easily offended. So if you find money a sensitive topic, you might be in this stage.

If you are fortunate, you might skip this stage. There are some people who go from ignorance to the next stage – recognizing that you do have a problem with your debts.

Resistance

After getting past the denial stage, you will go through resistance. In this stage, you are beginning to realize that you do have a problem. But unfortunately, you still don’t know what to do about it. The result is you resisting the proper solutions that would have made your life easier. In your mind, you are resisting help because you know that this is your problem and it’s your job to fix it.

While this mentality is not really bad, you should be open to other options that will help you get out of debt. If your options are confusing, do your research. Or ask someone you trust. There’s no shame in making mistakes as long as you are doing your best to correct what you did wrong.

Stop resisting the options that will make your debt relief journey easier.

Dismissive

The fourth stage is called the dismissive stage. It’s a bit like resisting the options and trying to do things on your own. Now, you are just dismissing the dangers of your debt predicament. You think that everything will work out and that you’ll survive this. While the mindset is admirable, the lack of plans and action might backfire on you.

Unless you take your debt situation seriously, you will not be aggressive in trying to get rid of it. Without the right attitude, you might fail in your attempts to get out of debt.

To get out of this stage, you need to be reminded that acting on your mindset is very important. No matter how difficult it is, there’s a way out and you can complete your debt relief journey.

Acceptance

This is the stage where things will finally start to move forward. You are finally accepting that your debts are your own responsibility. You landed in it so you have to get yourself out.

When you get to this stage, you have to be careful. While you are ready to accept your situation, you have to be prepared to face your fears as well. This is the time when you’ll get the courage to really look at your situation and assess the damage that debt brought upon your finances. What you’ll find might cause you to feel fear because of what you have to overcome.

But that’s okay. Take that fear and use it to challenge and motivate yourself to get out of debt.

Application

The final stage of your debt relief journey is application. This is the time for you to be proactive in completing your debt relief efforts. You can choose to do this on your own. Or you can get the help of someone who is more capable and knowledgeable. Whatever option you choose, make sure you start with a plan. This will be your guide as you try to get out of your tough debt situation. It will also help you stay on top of the whole situation. That way, you can monitor the progress of your debt payments. If there is a need to make a decision, you can act quickly to make informed choices.

Tips to ensure you’re debt relief journey is a success

Now that you understand the 6 stages of your debt relief journey, where do you think you stand right now? Identifying where you are will help you determine how to act. When you act accordingly, it will be easier for you to progress to the next stage.

While you are trying to pay off your debts, there are three important rules that will help make things easier.

Have a plan

Start by having a plan to get out of debt. You need to make sure that you are not just blindly going into all of this. You have to create an actionable and reasonable plan that will allow you to maximize your finances to support your debt relief journey. This plan will be your guide from start to finish. It will tell you what expenses you need to sacrifice and the amount you have to set aside to meet your debt payments. More than that, it will also tell you when all of your sacrifices will end. Sometimes, people just need an organized plan that will tell them when their journey will end. It motivates them to keep going.

Commit to the plan

Once you have your plan, it’s important to commit to it. If you can stick to the plan, you’ll be in a better position to complete it. This means you have to make it a priority. If you get a side gig that will increase your monthly income, don’t use the extra money to buy new clothes or to go on a vacation. Use it to pay off your debts. That is how you commit to it. In case there is an expense that you need to pay, make sure it’s really necessary. Don’t compromise your debt payments unless it’s absolutely needed.

Reassess the plan

Finally, you have to be ready to reassess your plans every now and then. Getting out of debt is not an overnight thing. You should expect your debt relief journey to be quite lengthy. That means a lot of things can happen from the moment you started your payments and until the last one. Your lifestyle can change and that means your expenses will change as well. That can affect your ability to follow the plan that you created. This is why you have to make sure you will reassess the plan to ensure that it is still aligned with your current financial situation.

What Are The Basic Debt Relief Options You Can Choose From

June 28, 2020 By editor

There are basic debt relief options that you can choose from that will help you get out of debt. These options are all effective. But there is usually a specific option that suits your unique financial situation. You have to find out what this option is so your journey towards debt relief will not be difficult.

Using the right debt relief option has a couple of benefits. The main benefit is it will be affordable. Sometimes, people have the ability to pay off their debts but the monthly plan is just too expensive. There are debt relief options that will allow you to lower your monthly payments so it will be easier to commit to. When that happens, your ability to completely pay off your debts will be more certain.

Considering the fact that there are more people with credit card debt when 2020 started compared to the previous year, a lot of people may need reminding of their options to pay off debt. And even if you did not start with debt early this year, there’s a high chance that you already have debt right now. The pandemic and the recession will make sure of that.

While things may feel and look scary right now, don’t worry. Even if it feels like your debts will get worse this year, there are basic debt relief options that you can use to make your payments easier. It’s best for you to start working on it right now so your debt will not accumulate over time. Because if it becomes too much for you to handle, you might not be able to pay everything off.

4 basic debt relief options to improve your finances

According to reports, the stimulus package and other initiatives of the government are helping people avoid defaulting on their payments. But how long will these last? How far can the government send financial help to keep people from becoming delinquent on their credit accounts?

While it’s nice to get these financial aids from the government, you need to start working on your own debts. Don’t wait for things to get worse before you get to know the basic debt relief options that you can use to pay off your debts. If you know your options it’ll be easier for you to start acting on your debts once it becomes too hard to handle.

So what are the 4 options that you have?

Repay on your own

The first of the basic debt relief options is to work on it on your own. This is your debt after all. And you are going to use your finances to pay it off. So you should have all the information that you need to find a way to pay it off.

The advantage of doing this is you can control how much you will pay. As long as you don’t go lower than the minimum amount, you can do what is comfortable based on your financial situation. And since this is all you, there’s no need to pay for any professional fees. Of course, that can also mean that the process will be longer. But if setting your own pace would make debt freedom more certain, then there’s no harm in doing it your own way.

To get started, you need to look at your debts. Make a list of everything that you owe. It is best to have a complete understanding of the problem so you can find the right solution for it.

Once you have analyzed your debts, the next thing that you should do is to find out how you can pay it all off. Look at your payment capabilities. How much can you afford to pay each month? Be honest about the amount that you can afford. If you can be detailed about how you will pay your debts, that would be better. It will allow you to make concrete plans about getting out of debt. It allows you to really look at the hindrances that might become a problem as you pay off your debts

Get help from a professional

If you think that doing things on your own is too difficult, you can opt to get help from a professional. This involves getting help through a credit counselor or a debt negotiator. There are paid and non-profit organizations that you can go to for help.

The advantage of working with these professionals is their expertise. When you tell them your financial situation, they immediately know what to do. They have the experience and training to react quickly and provide the best option that will help you get out of debt.

The disadvantage here is the service fee that you have to pay on top of your debt payments. While there are non-profit organizations, their services are usually limited. So if you really want to get thorough professional debt help, you need to pay for it. If it would mean less debt stress for you, the fee may just be worth it.

Just make sure that you will conduct adequate research and due diligence before you put your trust in a debt relief professional. There are scammers out there who will only get your money and not help you at all. So make sure you will really get sincere debt relief help. Read reviews and visit their official website to get clues about how they work and how satisfied clients are with their service.

And if you find the right company, make sure you only commit what you can really afford. They will help make things easier but they need you to cooperate. Provide them with the right information so they can help you.

Ask to have your debts reduced

Another one of the basic debt relief options that you can choose is to have your debt reduced. You will go to your creditor or lender and tell them that you can no longer pay off your debts as you did before. Because your financial situation is not going to get better anytime soon (e.g. unemployment or medical emergency), you need to request for more drastic changes to solve your debt situation. Like asking for your balance to be reduced. If they agree, this will make it easier for you to get rid of your debts completely.

Now there are two ways for you to do this. You can do it yourself. But make sure that you know what you’re supposed to do. Remember, you will be asking something from the creditor that they might not agree on. So be prepared to fight for this. Admittedly, this can be stressful. And it will involve a lot of research on your part.

If you think you can’t do this, you also have the option to hire a professional to help. They usually have an existing working relationship with your creditors and lenders. They know how to navigate the negotiation process so you can get favorable results. This will cost you but if it can save you more money, then it should be okay.

Prepare to declare bankruptcy

The last, but probably the least liked among the basic debt relief options, is to prepare for bankruptcy. This is the last resort for most people. And it should also be the same for you. Try to exhaust all the other options before you think about declaring bankruptcy. That’s because this will stay in your record for a long time.

Of course, even if it’s the least popular option, it doesn’t make it wrong. If you really have no choice, you can file for bankruptcy. But try to talk to a credit counselor before you file. This is mandatory anyway. Bankruptcy courts will ask you to talk to these counselors first. The goal is to make you consider the other options that you can use to get out of debt.

How to choose the right debt relief option

Now that you know the basic debt relief options that you can use, the question remains – how will you choose which one will get you out of debt?

There are three things that you should consider.

Type of debt

Take a look at the type of debts that you have. The different debts that you owe have various features that will help you decide the best debt relief option to use. For instance, negotiating your mortgage will not work because the bank can simply get your property as payment. But they don’t have the same hold on you if you try to negotiate credit card debts.

Payment capabilities

The next thing that you need to consider is your payment capabilities. This means taking a look at your income and expenses to determine how much you can afford to pay each month. Take note that your monthly debt payments should leave enough room for your basic necessities. If you can’t afford to pay for your debt payments and your basic needs at the same time, you need to opt for a debt solution that will make it easier for you.

Future plans

Finally, you should always take your future plans into consideration. Every time you make a financial decision, especially if it’s about your debts, you need to consider what you want to happen in the future. The solution that you will choose should take you one step closer to the type of financial life that you want to have.

5 Credit Card Rules You Can Ignore During The Recession

June 25, 2020 By editor

Credit card rules are important. Following these rules will help you manage how you use your credit cards. It will help you control how you use it and make sure that it will not be abused. Your knowledge of these rules will allow you to confidently use it without endangering your personal finances.

Ideally, you have to follow these rules every time you use your credit cards. Otherwise, you might be in danger of spending too much on your cards. That can make your debts grow significantly. And if you factor in the high-interest rate, your debts can quickly reach a level wherein it will be harder for you to pay it off.

But what if you are in the midst of a crisis? Will these credit card rules still apply?

According to a survey, a lot of people were forced to use their credit cards to pay for a lot of essentials they needed in March and April of 2020. This was during the time when people were forced inside their homes to avoid being infected by the coronavirus.

Because of this, they were forced to stop going to work. For a lot of people, that meant they did not receive their monthly salary. Since they were forced to stay indoors for a time, they had to buy a lot of essentials in bulk. To make the purchase, most of them had to use their credit cards to help them preserve their cash.

This resulted in a huge increase in credit card debt. Not to mention the fact that there were a lot of credit card rules that were broken because of this.

And with the recession weakening our financial situation further, our credit card debt is bound to get worse.

Credit card rules you can stop following during a crisis

We want to make sure that we stick to the rules when it comes to our credit cards. But the reality is, there are instances when we will be forced to break those rules. Economic situations and financial difficulties can justify the need to ignore some of the credit card rules that we should be living by.

So what are these rules? Here are 5 of them.

Pay your balance in full

To keep yourself from paying the finance charges on your credit cards, make sure you pay your balance in full when the billing statement comes.

But if you are experiencing financial difficulty because of the recession, it’s okay to break this rule. A survey revealed that 17% of their respondents carry more than $10,000 worth of credit card debts. Obviously, this will be hard to pay off all at once. So it’s okay to carry a balance over to the next month. After all, you will not do this all the time. The recession will end over time. But you need to survive it first

Hold on to your cash and don’t feel guilty about using a credit card even if you can’t pay the balance in full.

Give more than the minimum payment requirement

This is one of the most common credit card rules that you need to always do. Paying only the minimum requirement of your credit card debt is not a good idea. The high-interest rate will make your balance grow significantly. This is why you have to pay more than the minimum payment requirement.

But if you are in the midst of a financial crisis, then it’s understandable if this is hard to do. You hardly have enough cash to pay for your basic needs. You will not pay more than what is needed towards your credit cards. You want to reserve as much as you can for your basic needs. And if you want to at least keep a good credit score, you need to stick to the minimum payment requirement. It will not take too much from your finances. But it will keep you from being delinquent.

Of course, if your finances will really need to be conserved, you can stop making payments altogether. But make sure that you talk to your creditor and ask for financial hardship. They will allow you to stop making payments for a time without it damaging your credit score further.

Maintain a credit utilization rate that’s lower than 30%

To keep a credit score good, you have to keep your credit utilization rate 30% or below. That means if your total credit limit is $10,000, you can only borrow up to $3,000.

Again, if you are in a financial crisis, it’s okay to go beyond this. If there is a need for you to buy the essentials that will help your family survive, go ahead, and use your card. Your survival and the comfort of your loved ones is more important than your credit utilization rate.

Stop stressing about it and focus on what matters most at this point in time.

Keep your credit score high

We all want to keep our credit score up. Having a good credit score will help open a lot of financial opportunities for us.

However, if you are in the midst of a recession, this will be harder to do. Especially if you are relying on your credit cards to pay for basic necessities. As you keep on using the card, it will not just affect the credit utilization rate. The financial crisis will cause you to miss out on payments. And according to a recent survey, a fourth of the American population are worried that missed payment will drag their credit score down. And the current crisis will end up making people miss payments.

And in light of the crisis, you have to be okay with that. You know why? Because your family’s survival is more important than a credit score. The situation is stressful already. If you think about your credit score, it will make things worse. And you need to keep a clear head if you want to figure out a way to make things better.

Don’t use your credit card as an emergency fund

A lot of people are using their credit cards as a source of an emergency fund. They do not take saving cash seriously. They know that they can always rely on using their credit card in case they need to go to the hospital. Or if they need to have their car repaired. But if you go through one crisis after another, relying on your credit cards will only lead to a huge amount of debt. This will really hurt you financially.

This is why one of the financial lessons that you should have taken seriously before the crisis is to save up for an emergency fund. This would have helped you get the cash that you needed to survive the current crisis that we are going through.

While an emergency fund would have been very helpful, the current events of 2020 would have depleted most people’s savings. After the coronavirus pandemic, we were plunged into a recession. People lost jobs and some are burdened with huge amounts of medical bills. It’s hard to survive on just your emergency fund alone.

If this is your case, then using your credit card as part of your emergency fund makes sense. Don’t keep yourself from this financial source if it will help your family survive.

2 credit card rules you should never ignore

While we’ve been discussing the credit card rules that you can bend during a crisis, there are two important rules that you should never ignore. No matter how bad things get or how much debt you accumulate, you should never stop following these rules.

Monitor your credit spending

The first is credit monitoring. Every time you use your credit card to pay for anything, you have to take note of that. If you have a spending plan, you have to make sure it’s aligned with how you use your credit card. This will allow you to track your expenses. When you are monitoring your spending behavior, you get to be more cautious about how you use your credit cards.

Since you are monitoring your credit spending, you can stay in full control over it. If you’re starting to overspend, you can do something to ensure that you will not go overboard and pull yourself into a deep debt pit.

Use credit with a purpose

The second of credit card rules that you should always follow is to use credit with a purpose. Don’t just use credit because you want to. It has to have a purpose. This will help you decide if an expense is necessary or not. If it’s not necessary, you have to skip using your credit for it. You need to reserve it for more important expenses. Like your basic necessities. Or an emergency expense that might save your life. Your credit card has a limit. You have to remember that. If you cannot control your spending and you reach that limit, you cannot use it anymore. Not to mention the fact that you cannot pay it off because of the recession. So don’t exhaust this source of funding if you don’t have to.

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