The basic steps to manage your way completely out of consumer debt.
1. Make a Quality Decision to refuse to take on any new debt.
This means that you and your family unit are totally committed to become debt free and there
is no option to even consider debt when a need arises. This level of commitment must be stronger
than a New Year's Resolution or some emotional decision made with little thought.
2. Determine the root cause of the consumer debt problem.
There are several
factors that can get you in over your head to where you can at best make
minimum payments on your accounts. Most consumers fall into one of the
primary areas below:
Poor Spending Habits - This could be on the part of your self, spouse,
or family member. If there is a lack of self-discipline then this issue
needs to be addressed with a reality discussion and educational materials.
Harbour provides free material via the website, educational brochure,
and seminars in our Virginia Beach office. Harbour also offers detailed
educational material that includes books, CD-ROM, and Internet testing
system to measure your progress. The cost of these materials are credited
to you upon either successful completion of the course testing, starting
of a debt management plan, or starting of a debt resolution plan.
:: Educational Materials ::
You can't borrow your way out of debt. You
MUST get the financial education to understand
the importance of discipline or your plan is designed to fail. You can't
keep buying time with refinances, consolidations, and restructuring.
Life
Event - Most typically consumers get into high debt due to a
life event. A life event includes divorce, job downsizing, auto accident,
physical illness, or death of family member. Basically you are financially
literate, have good discipline, and the desire to get your financial house
back in control. For these persons, the educational element is not needed.
3. Develop a Spending Plan
You must exercise your responsibility concerning sources of your income
and recording exactly where your income goes each month. This step involves
planning to maximize your family income and minimize your family expenses
to those that are truly necessary and of a priority to your situation.
Typically, this is called a budget that indicates a restriction
to your life and is not favorably received by the family. Actually, you
need to consider your plan as a "spending plan" because YOU are deciding
which priorities exist and YOU make the choices of where your money goes
each month. There is a distinct freedom when you control your financial
resources even if it means that no funds remain to provide for all the
needs at this particular time. Over time the real priorities will surface
and the less important desires will fade. In summary, this step means
"Earn all you can and spend less than you earn".
Spending Plan worksheets and discussion are available on
the Forms section of
this site. Feel free to call Harbour for help in working this out and
getting started correctly (800) 403 - 3287.
4. Utilize a Strategy (Tool) to Eliminate Your Debts
From the spending plan exercise above you have determined
a monthly amount available to be directed for consumer debt that includes
credit cards, finance company accounts, and store cards.
Based on this amount you will be able to select the correct tool to use for clearing this debt in the best possible way. Remember that each tool has it's own pros and cons associated with it. You probably will want to select the tool that matches your available funds each month.
