Creating a Financial Plan


Warning Signs Of A Debt Problem

If you answer “yes” to any of these questions, you have a debt problem…

 • Are your credit cards charged to the limit?

 • Do you use one card to pay off another?

 • Are you making only the minimum credit card payments while still incurring charges?

 • Do you skip paying some bills each month?

 • Have creditors closed any of your accounts?

 • Have you taken out a consolidation loan?

 • Have you bounced any checks?

 • Are collection agencies calling or writing?


Creating A Financial Plan

1. Review Your Personal Finances: The first step toward taking control of your finances is to determine how much money you earn; and, perhaps more importantly, how much you spend. These are the two most important initial determinations to be made and will serve you well as you go through the financial planning process. You can get started by listing your income from all sources. Remember to be as thorough as possible. Then, list your “fixed” expenses (expenses that are the same each month, such as mortgage payments, rent, car payments or insurance). Next, list your “variable” expenses (expenses that change each month, such as entertainment, clothing, or transportation).

2. Track Your Monthly Expenses: Regardless of how much you review your budget, you cannot begin to manage your debt without understanding more about your personal spending habits. Begin by writing down what you spend each day and keep these records for a month to determine how you spend money. Next, review total amounts spent for such items as transportation, clothing, entertainment, or other variable expenses. Tracking these will provide you with a detailed summary of how you really spend money.

3. Review Your Credit Report:  To further understand your financial situation, you will need a recent copy of your credit report. You can obtain a copy, at no charge, from Review your report for outdated, duplicate, or incorrect information. Credit reports often have multiple errors, so you may need to dispute all incorrect information at your earliest opportunity.

4. Contact Your Creditors: If you are having trouble paying your bills, contact your creditors, explain your hardship, and ask for modified payment arrangements. Do not wait until your accounts have been turned over to a debt collector. If this happens, you will have more difficulty negotiating new terms.

5. Talk To An Expert:  Credit counseling organizations will provide helpful suggestions for consolidating various debts. They will also review your personal finances, and offer suggestions for managing your finances. You may consider enrolling in a Debt Management Plan (DMP) through a credit counseling agency. Upon enrollment, your unsecured accounts will be closed and reasonable payment arrangements will be established at reduced interest rates. Late and over-limit fees will be eliminated. Should you remain active in a DMP, your unsecured debt will be fully paid in 3 to 6 years.

6. Understand, But Avoid Bankruptcy:  Sometimes managing debts means filing bankruptcy, but this option is a last resort and should come only after careful consideration. Remember, the negative impact on your credit record will be long-lasting and far-reaching.