In life, as in business, liquidity is the key to survival. It is not enough to have assets. If these assets are not readily available, cash flow could become difficult. Part of the reason for the lack of readily available cash is the existence of debt. When all spare money is used to pay toward bad debts, then there is less to spend on other things.
How to Reduce Debt and Gain Financial Freedom
The best way to keep money in the bank or in hand is to reduce debt. There are many options to do this and this article will cover a few. Borrowers can use a debt company to help assess the situation and provide clear steps to get the finances under control. Another option is to make a personal debt management plan and stick to it.
Steps to Take to Help Write off Debt
- The first step in the plan is to know how much debt really exists. This can be done with the help of a comprehensive credit report.
- Make a list of the debts, all the companies owed and the amount of interest charged for each debt. Rank the debts according to the interest rate, from highest rate to lowest.
- Evaluate all personal assets and income to determine if there is enough money to increase the payout on the debt with the highest interest rate. Once this debt is repaid use the money that was paid to the former debt and put it towards the next debt in line and so on until all the debts have been paid off.
- If the third option is not possible, then try contacting each company with the aim of negotiating a settlement. This is the chance to offer a pay off figure which is affordable but make sure it is a fair offer. Whatever is negotiated, make sure the company puts it and writing and keep it on file.
Reduce Utility Bills
Reducing the amount paid on household bills can free up cash. This amount can then be put towards other outgoing debts. Shop around and look for cheaper, phone and other deals. Any savings should be used to clear specific debts.
Using Debt Agencies
If it is too difficult to set up and stick to a debt management plan, then using a debt agency could prove to be a wise choice. Even though it may have taken only a few short steps to get into debt, getting out of it would take longer ones. Once a plan is in place however, stick to it and the results will soon become evident.
Before choosing any debt agency, time should be spent vetting the company to ensure they are legitimate as there are many unscrupulous companies out there.
Related Articles
Readers may also be interested in Personal Debt Management and Debt Settlement Benefits and Disadvantages.
Sources
Caldwell.M. (2009) How to Pay Off Bad Debts [Online] Available from About.com [Accessed 21 August 2009].
 |
