When a person accumulates debt, it is often a symptom of a bigger problem. Overspending leads to debt accumulation, and can be a symptom of a medical or psychological problem such as depression. If you do not get control of the situation, the problem grows and can rob you of a sound and solid financial future. If you have a debt or spending problem, find a way to work through it or seek professional help.
Develop a Written Budget
To get control of debt and overspending, you must have a financial plan, or a budget. Begin the budgeting process by listing all of your expected income for the month. Then, list your fixed expenses. These are expenses like housing or loan payments that do not change each month. Below the fixed expenses, list the variable expenses like groceries or the electric bill. Use an average of what you paid on variable expenses over the last several months to help you. Allocate all of your projected income to different categories, and make a commitment to follow your budget, and not spend money that is not listed.
Contact Your Creditors
You need to inform your creditors immediately if you are having a difficult time paying your bills due to overspending. Tell the creditors why you are having difficulties, and ask them if they can help you work out a repayment plan that is modified to suit your budget. You can also send them copies of your budget, so that they know that you are trying to work out your problems. This will also tell each creditor exactly how much money you have available, so it may be more willing to work a custom plan for you.
Sell a Car or Home
If your overspending is on larger assets, like a house or car, or other depreciating assets, you may need to cut your losses and just sell the items, paying off the creditor. This may be difficult if you owe more on the property than it is worth, but if you have communicated your problems with your creditor, it may see this as your best way out. You may be able to work out a deal with your creditors on any deficiency balance on these assets.
Find A Credit Or Debt Counselor
If the problem is too much to handle on your own, seek help. This could be an independent person who can review your entire financial situation and advise you as to how you should proceed in paying off your debts. The counselor may also help you negotiate directly with your creditors. Many credit counselors are nonprofit, but that doesn't mean that they are a charity; the fees could be higher than their for-profit colleagues. If the counselor is not able to help, bankruptcy may be an option to help you with your debt problems. Make sure that you are taking care of yourself medically and psychologically, and see a doctor if your overspending problems seem to be caused by a health concern, such as depression.
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