By managing your debts alone, you plan to reduce debts through disciplined budgeting. The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your “fixed” expenses, those that are the same each month such as a mortgage payment or rent, car payments, and insurance premiums. Next, list the expenses that vary such as entertainment, recreation, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.
- Contacting Your Creditors: Contact your creditors immediately if you’re having trouble making payments. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.
- Dealing with Debt Collectors: The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.
- Managing Your Auto and Home Loans: Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.
Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car and pursue collection activity for the balance owed.
If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. If you and your lender cannot work out a plan, contact a housing counseling agency, many offer free help to any homeowner who’s having trouble making mortgage payments.
There’s no underestimating the importance of formulating a budget. It’s a process that helps you develop the self-discipline you’ll need to manage your money and keep needs, wants and desires in their proper relationship. A spending plan also forces you and your family to develop disciplined attitudes about earning, saving and living within your means. To learn more about establishing a budget download a free copy of It’s Not What You Make, It’s How You Spend.
You can access our personal monthly budget form by clicking here. Once you access the form, you’ll be able to enter and keep track of your monthly budget
To access our Track Your Spending worksheet, click here.