How to Avoid Financial Disaster
Debt doesn’t matter—until it does. Credit card bills pile up, home mortgage rates shoot up, yet you don’t notice anything because you can continue to make your minimum monthly payment. Until one day, you find that you can’t. At that point, you might start panicking, wondering how you reached this point.
If you haven’t yet reached your breaking point, there are steps you can take to ease the financial burden and avoid a financial crash. However, if you are looking at your bills and wondering how you can buy groceries this week, then bankruptcy might be an option for you.
Create a Budget
Before taking any action, you need to understand how bad things are. It sounds so simple, yet few people really understand how much they are spending each month and how much money they take in. Creating a budget will help you get a handle on your spending patterns and possibly highlight the need for a second job.
Sit down and put all of your fixed expenses in a pile. These include rent, health insurance premium, car payments, and anything that costs the same month after month. In another pile, put all expenses that fluctuate from month to month. These should include groceries, entertainment, and anything discretionary.
Once you understand your expenses, try to reduce your discretionary expenses as much as possible. Cut out trips to the movies, meals at restaurants, morning coffee, and anything that isn’t an absolute necessity. Ideally, by cutting the fat, you can get your monthly expenses below your monthly income. If not, you will need to consider getting a second job or reducing your fixed expenses.
Address Your Debt
Once you free up money in your budget, you should begin applying all extra sums to your debt. There are many different methods people follow: the snowball, avalanche, or debt snowflake method. Regardless of the approach, you need to consistently pay off your debts and stop spending on luxuries.
You might also be able to lower your monthly debt payments by negotiating with your creditors to waive late fees and penalties or to reduce your interest rate. If you don’t like negotiating on your own, you might work with a credit counselor to create a debt management plan.
Talk to a Plantation Lawyer about Bankruptcy
Sometimes, the best option to dig your way out from debt is to file for bankruptcy. In a Chapter 7 bankruptcy, for example, you can quickly wipe out unsecured debts such as credit card debt or medical debt. The entire process typically takes only a few months from start to finish, instantly relieving you of crushing debt burdens.
Many of our clients come in worried about how a bankruptcy will affect their future. These worries, though legitimate, are usually overblown. Although bankruptcy will lower your credit score and stay on your credit report for years, its effect will gradually diminish as time passes. And you can begin to rebuild credit right away by applying for a secured credit card and using it responsibly.
For a free consultation, contact one of our Plantation bankruptcy lawyers at Nowack & Olson today. We will review your situation and advise you about how a bankruptcy can help you achieve financial freedom. Call us today at 866-907-2970 for a free consultation.