Managing finance and debt is not easy and you will need to know a lot of things and ensure a lot of diligence to reach your financial and debt goals. Irrespective of what your debt goals are, you must have a proper plan and the best time to begin with it is RIGHT NOW.
The best plan to go ahead with your finance and debt management endeavor is a SAM plan that includes:
- S: The size of your loan
- A: Analyzing your financial circumstances and
- M: Making the plan according to the above two findings.
If you follow the SAM action plan you will not only know about your current finance and debt situation but it will also help you to save for later by following a few purposeful steps to identify and make the necessary changes to secure your financial future.
This strategic plan will help you to get the relevant answers to some of the most important questions in finance and debt management such as:
- What does the current debt situation look like?
- How is your current financial condition?
- Do you have and follow a good plan for using credit?
- What is your credit score?
- Is there anything in it that needs to be rectified?
- What you can do to reach your debt goals?
These answers will help you to set up intentional and achievable goals such as lowering your Debt-to-Income ratio or improving your credit score.
Need to avoid Bankruptcy
At all cost, you should take all possible steps and make all possible efforts to avoid bankruptcy. There are several reasons for it such as:
- It is better and more satisfying to wipe away your multiple debts with a debt consolidation loan if possible rather than filing for bankruptcy
- Your credit report will also take a hit if you file for bankruptcy for seven to ten years depending on the type of bankruptcy you file for and
- Even if you get past it, it will warrant for a lot of efforts, strict discipline and proper budget and plan to follow for several years down the road.
Therefore, you can see why most people look for debt relief from National Debt Relief rather than visiting a bankruptcy lawyer. It is required to think twice before you take this route. Here are a few specific things that you should know about bankruptcy.
Types of bankruptcy that you can file for as an individual are:
- Chapter 7 bankruptcy – In this form, there will be a trustee appointed by the court that will essentially sell most of your valuable assets and belongings to pay your debts off
- Chapter 13 bankruptcy – In this form of bankruptcy you can retain your property and follow a repayment plan that is approved by the court to pay off your existing debts.
Apart from these two most commonly known forms of bankruptcies, there are also other options of bankruptcies available but it will depend on your eligibility to qualify for those. You can visit the website of or physically to the US courts to gain substantial information regarding bankruptcy.
Good and bad sides of bankruptcies
Just like any coin, bankruptcy to has its good and bad sides as well. If you file for bankruptcy the fact that you will not have to pay or repay the loan in your terms may sound good but there are a few things that bankruptcy will not address or erase a few specific kinds of debts. Among these debts feature:
- Most of your tax debts
- Any student loans besides a few rare exceptions
- Any new debt you incur after filing for the bankruptcy
- Your payments for child support and alimony
- Any penalties or fines you need to pay to any government agencies and
- Any debts to others that are a result of a personal injury caused by you from intoxication.
Apart from that, bankruptcies do not address any debt forgiveness that may extend to others such as your parent or spouse who has co-signed on your loan application. That means, even if you get a direct relief from your debt, the co-signer will be still responsible.
There are also a few long-term impacts of bankruptcy.
- As mentioned earlier, it will stay in your credit history for seven to ten years and affect your ability to get credit dramatically.
- When you file for bankruptcy, your credit report will be marked as “charged off.”
- The fact that you filed for bankruptcy will indicate that you are not very good or keen in your finance which is a negative point considered by the insurers, landlords, employers, and any other entity who pulls your credit record for valid and permissible reasons.
- Lastly, if you manage to get any credit after you file for bankruptcy, you will be charged a higher rate of interest by the creditors, asked for greater down payments and even be asked to put up collateral security for it.
Therefore, instead of struggling to rebuild your credit history after bankruptcy, it is wise to take care of it beforehand so that your credit is repaired as and when required and automatically make you eligible for a loan for consolidation or for other purposes.
The SAM plan
If you follow these guidelines you will be able to size up your situation:
- Maintain a high credit score of 700 or more
- Know the time taken to repay debts through monthly payments
- Know the total amount to pay for your credit obligations
- Also Know the loan costs such as fees and interest and
- Maintain a DTR of less than 20%.
In order to analyze your circumstances look if you:
- Spend more than 20% of your monthly take-home income on consumer debt
- Miss payments or pay late
- Overdraw your checking account more than thrice a year
- Borrow to pay off other debts
- Make only minimum payments
- Borrow from retirement accounts
- Use credit cards to pay bills
- Receive collection calls and
- Have to take an extra job to pay your bills.
Lastly, when you plan to make sure you consider the cost of the loan, read the fine print, and pay as much and as early as you can.
Also Read- Top Secrets of Overcoming Miserliness