Controllable factors involve the ability to follow a strict budget, stop sudden urges to go shopping and purchase items that you may not even use, manage your spending behaviour and move away from materialistic traits.
Uncontrollable factors involve losing your job due to cutbacks, increases in utility costs, tax and interest rates, increases in food prices, education and excess medical bills.
The first step in debt management is to accept that you are in debt due to either controllable or uncontrollable factors. This is the turning point where you begin on the road to recovery.
It is important that you take stock of your situation by doing the following:
1.List all of your debt from the smallest amount to the largest amount and the terms in which they are required to be paid off.
2.List all your monthly expenses, firstly all the fixed costs such as mortgage repayments, then your variable expenses such as food, utilities, entertainment and other monthly purchases.
3.Add up all of your expenses and compare the total to your monthly household net income and write down the difference.
The only expenses that you will generally be able to lower, without downsizing, are your variable expenses. This means that you have to change your living standards, by cutting out all of your luxuries and lowering the amount spent on entertainment, or changing your source of entertainment. It is less expensive to invite your friends to your home and everybody brings something to contribute to the meal, than going to a restaurant and paying those high prices or buying fast food on a regular basis.
Here are a few different ways to take control of your debt:
1.You could have a garage sale of all the items that you have no use for in order to generate cash.
2.Contact your creditors and arrange terms with them that suit both parties.
3.Contact your banking or financial institution and try to take out a loan where you can consolidate all of your debt at a fair interest rate and amount that is affordable for you to repay without having to go beyond your budget.
4.If you have exhausted all possibilities, then you may have to consider an alternative income to subsidise your expenses or consider downsizing.
5.If you are in absolute dire straits, it would be beneficial for you to contact a financial advisor or pursue legal advice on the route that best suits your situation.
When you have reached a situation where you have control of your debt, it is vital that you open an emergency savings account with your banking institution where you deposit as much as possible on a monthly basis, so that if the situation ever arises again where you are met with unexpected expenses or bad luck, you have a safety net to cushion you while you get yourself back on track.
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