Millions of Americans worry about debt and finances just about every day. They may be in an early stage of their career where their income is not enough to cover living expenses, or trapped in a cycle of debt caused by either high spending or debt incurred by emergencies. If you hear yourself looking for debt relief you need to know that your debt problems are not permanent. Strategies and new habits along with the use of bankruptcy laws can help you succeed in overcoming their debts and gaining control over their finances. If estate planning and financial planning seem like only a dream to you, there’s hope that you can get debt relief and actually achieve your goals after all.

Better Financial Habits

Budgeting

Anyone who is in debt or concerned about being in debt should always draw up a budget and stick to it. Your budget should start with the amount of money that you want to save, plus the amount that needs to go directly to paying off debt, then fit all of your discretionary spending around those amounts. Having more money invested and in savings means that you will be better prepared for the future, especially potential financial emergencies. Once again, there are many really good budgeting tools out there, both simple and more detailed, that can help you structure your financial future.

Shopping Habits
A common money saving tip is to always look for the generic brand when shopping. They are often exactly the same as a name-brand product- with some exceptions of course. Ask yourself if you would rather have a name brand now or get yourself out of debt? Consumer products and medications, generic brands are significantly cheaper and can save money without sacrificing quality.

Finding money-saving tricks, like using coupons

Many people on a strict budget swear by couponing. If you are diligent and have the time to search for the best deals, it may be worth it to sharpen those scissors and start clipping. There are quite a few couponing websites and other resources to help you get started; users will tell you that there are incredible savings to be had on everyday items.

Credit Cards
Many experts also recommend getting rid of your credit cards. Whether you permanently destroy them, cancel your accounts or freeze them in a block of ice to use only in an emergency, weaning yourself off easy (and expensive) borrowing is a great idea. Waiting until you have the money to buy something is always better than borrowing so you can get it now. If your credit cards are stored in your online accounts, be wary of the temptation of shopping online and take measures to keep yourself from going there.

Another money saving tip for the more disciplined is to find credit cards with cash back rewards programs. Those programs can bring in potentially hundreds of dollars per year that you can use to pay off debts. The best ones currently offer from one to six percent cash back on purchases- but watch out for annual fees that may eat into your earnings.

Debit cards are a good option for shopping in our digital economy. If you can’t use cash, a debit card can act like a credit card, but you’re not borrowing on credit- you can only use what’s in your checking account. When it’s empty, your card won’t work.

Saving for the future
Perhaps the best financial habit is saving and investing. Everyone should save a certain percentage of their income every month and invest that money into some kind of reserve like a  type of long term interest bearing account or fund that accrues in value. You can do this by framing your spending and budgeting around an inflexible savings dollar amount. Even if you need to put a large percentage of your income toward debt, start saving just a little each month to develop the habit. Most of us aren’t saving enough for retirement, but it’s never too late to start!

Can I Really Get Debt Free?

There is good debt and bad debt. 

There are several types of debt that are better than others. The most common is a mortgage on a home. A mortgage has a long amortization and a somewhat stable interest rate that makes paying off the debt predictable, and as long as you continue paying each month it shows you can be trusted as a borrower and your credit rating is improved. Other debt that can be good for you are car loans that you regularly pay, showing that you are responsible and able to handle borrowing over long periods.

Indebtedness that should be avoided or minimized if possible is short term credit debt. Credit card debt usually hits the borrower with a high interest rate. Maintaining a balance on a credit card costs a surprisingly large amount over time.

Let’s imagine that you have an unpaid balance on your card totaling $3000. Pay the minimum amount due each month, say $60, and the card charges 15% interest, here’s what that $3000 purchase will actually cost you after 16 years of paying the minimum amount due:

$6641.00. Yes, way more than double the charges on the card, and that’s after sixteen years of paying a small amount every month.

 Another example of a bad debt is a debt owed to a collection agency or a payday lender. These debts often increase substantially through late fees and exorbitant interest charges. Destructive debts need to be paid off as quickly as possible- the first priority of anyone trying to get out of debt.

What is debt consolidation?

Debt consolidation is a process that some companies offer for people hoping to erase debt. This process involves a debt consolidation firm paying off all of your various debts at all their various interest rates. All you have to do is assume one combined loan payable to the consolidation company  This process seems to be a magic bullet for many individuals because it involves only one loan at what seems like a reasonable rate of interest, and the promise of no more harassing collections calls.

While there are some legitimate organizations that can do this for a debtor, the vast majority are problematic. Many debt relief companies have extremely high fees and penalties that you must be very careful to avoid. There are also some debts that cannot be easily consolidated.

Watch out for “Debt Settlement” outfits that promise to restructure your debt in your favor by negotiating a lump-sum payment with your creditors so that you end up paying less that what you actually owe. The problem is that fraud is usually the name of the game with debt settlement groups. Once you stop paying your creditors and pay the group their fee, nothing happens and you are left with late fees and accrued interest on debt you were already having trouble paying.

How to get debt free

Tackle debt strategically. One way to handle it is to pay off debts one by one. Find out what debt they have has the highest interest rate. Work on paying that one off first while paying the monthly minimums on the others. Once that expensive debt is paid off, move on to the debt with the next-highest interest rate and so on. In the meantime, establish new habits like budgeting and saving and be patient. Over time a new and better financial picture will emerge.

Our staff here at Braziel Law is widely experienced with helping people like you find their way out of the panic and crush of financial obligation. We have many, many creative ideas for helping our clients get out and stay out of debt.

Can Bankruptcy Result in Debt Relief?

There may not be enough hours in the day for you to take on a new job and increase your income, and there are limits to how much you can restrict your daily spending. You may have alimony or child support that you are bound by law to pay, and there’s not much paycheck left at the end of the month. Even with proactive steps toward financial health like budgeting, it may not be enough. For those whose debts are really serious, declaring bankruptcy might be the best option. Whether you hope to erase old medical bills or tax debts, the legal steps taken in bankruptcy may be a good answer.

People who are in debt are often stressed and confused. They do not know where to turn and do not know how to get started, and they know that the fight against debt cannot be solved quickly. We work with clients who need to formulate a plan and then work according to that plan for years. But if that plan is careful enough and an individual sticks to it, it is definitely possible for most people to work their way out of debt.