You probably have seen advertisements about consolidating your debts to save money. There are many practical reasons why a person should consider a debt consolidation. But prior to proceeding with any type of consolidation strategy, you need to understand how you got into the financial hardship you are currently facing.
Lack of Budgeting
The majority of consumers out there are not taught budgeting in school and their parents did not have access to this financial education either. Most people consider “budgeting” a bad word, but at its most fundamental level provides a financial snapshot highlighting your current financial health. When establishing a budget there are a few things you will need to do, starting with listing all of the debts you currently have whether they are to individuals or corporations.
After you have listed all of your debts on the sheet, you will need to list all of your sources of income on the other side of the sheet. Total up the income then deduct all of the debts and if your results is zero or less than zero it means you are on your way to financial ruination! Fortunately, there are ways to stop this economic train wreck by looking for ways to increase your income. By increasing your income you will be able to build a cushion of cash to offset any shortfalls that could arise if you were unable to work for any length of time.
If increasing your income is not a viable option, then you will need to slash your expenses and go for a debt consolidation.
Consolidating Debts: Understanding the Process
If you are unable to meet all of your financial obligations then you will need to proceed with consolidating your debts. In theory you could do this yourself but it would be to your benefit to turn to professionals that have experience in this area. The professional firms are going to reach out to all of your creditors and ask them to reduce the amount of interest they are charging you and also find out whether they will reduce the total debt you have to them. This is similar to a consumer proposal but not legally the same. Your creditors knowing that there is a good chance they won’t be repaid if you go bankrupt will usually agree to lower the interest rates being charged and reduce the total debt owed.
These immediate savings is just one benefit of having your debts consolidated. By having a single payment instead of having to deal with multiple payment dates in a month, you are less likely to miss a due date and deal with the late payment fees associated with those missed payments.
The longer you wait to deal with your financial problems, the more expensive it will be for you in the long run so do yourself a favor and get professional help right away. You will be happy you took the steps towards your goal of financial independence.