According to the Consumer Reports Index that measures the personal financial health of the American economy, Americans have reported noticeably lower stress levels with regard to their finances. The trouble tracker measure of the Index fell staggeringly to 33.0 from 45.7 a month back and this has been touted to be the lowest level since the organization first measured it in 2009, April. The trouble tracker has dropped more than 50% from its highest reported level (September 2009) with the greatest drop coming from households that earn less than $50,000 followed by the most wealthy homes earning more than $100,000. While there has been a general decrease in financial difficulties, middle-class families that seen a slight rise in the fiscal troubles.
The consumer watchdog, the CFPB or the Consumer Financial Protection Bureau has taken a number of steps to alleviate the financial stress of the consumers, to protect and safeguard them from shady creditors and to help them in every possible way. But how much is this affecting the personal finances of the debtors? Are they able to pay down debt and lessen their financial pressure? What are the alternative steps that they should take to beat the debt blues?
Effective tips to manage debt – When paying down what you owe is a necessity
Although there have been positive reports about consumers facing less financial stress, this doesn’t have a direct relation with the indebted situation of these consumers. Here are some tips from credit counselors who are connected with the NFCC to manage debt properly and achieve a firm grip on your finances.
- Negotiate after preparing a scaled back spending plan: A first step for all consumers should be to analyze your income, assets and expenses and then devise a budget that will scale down your expenditures. Once you make a budget, you should negotiate with your creditors and request them to lower the interest rates or the account terms and conditions in order to facilitate your debt repayment program.
- Merge your multiple debt obligations: An effective way of managing debt properly is to merge your multiple debt obligations. If you owe money to multiple federal student loan lenders, combine them through a direct debt consolidation loan and in case of credit card debt, you may be able to transfer your debt to a low interest rate card. Read the fine print before choosing to transfer the entire balance to the new card so as to remain aware of their policies on interest rate hikes.
- Prioritize your debt payments: Chances are high that you won’t be able to pay off all your debt obligations at the same time. Focus on remaining current on secured debt like mortgage loans and auto loans as these loans are backed by valuable property. Next you should give importance to the highest interest debts like your credit cards, payday loans and other utility bills. You may try the snowball or the avalanche approach towards paying off your debts.
- Get help from a credit counselor: Yes, it is a fact that sometimes paying off your debts on your own is just too tough but with the help of a credit counselor and a debt management plan, the entire process becomes easier. The debt consultant will act as a consolidator, collecting payment from you and distributing them among your creditors. If you get help from the non-profit debt counselors, you may even be able to save money.
When you have no options at your disposal, consider the last resort, bankruptcy. If you have sufficient resources through which you can repay a portion of your debts, you can file Chapter 13 bankruptcy. Chapter 7 entails a liquidation of assets although certain assets – personal home and vehicles may be exempt. Whichever option you choose, keep a close watch on your credit report so that you can rebuild it in order to become creditworthy in the near future.
Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributing writer with other financial sites. His expertise is woven around various aspects of the debt industry and helping others to get out of difficult situations.