Your debts are piling up and you think you seriously need to start a debt reduction plan. You may probably try debt reduction yourself by implementing several measures to control your finances. The first step to reducing your debts is to sort out your expenditure. You may need to take a closer look at how you spend and where your money is going to each month. Each month, other than the fixed bills of mortgage, car and insurance payments, what else do you pay for?
One of the best ways to track your spending habits is probably to write it all down. Get a small notebook or set up a personal cash account in your computer. Each time you buy something, take out your credit card or cash, take note and put it down in your expenditure account. At the end of the month, you may find that most of your money were probably spent on frivolous stuffs like dining out, movies and luxurious items you may not be able to afford. Armed with this list, perhaps you could streamline what you spend on and cut back. By cutting back, it means you may have to stop dining out so often but try eating in more often. You may also need to sacrifice the impulse shopping trips and stop buying things you don’t really need such as expensive watches, shoes, branded clothes, perfume, etc. You may need to learn to differentiate between essential stuffs and non-essential luxury stuffs. You may spend on groceries and necessities like toiletries but you may need to draw the line at purchasing more clothes than you need or even the extra pair of shoes just because it is in fashion.

Once you get your spending habits under control, the next in line is to cut down the use of your credit card. Credit cards are probably the main reason many consumers fall into debt. If you have a huge credit card debt, now is the best time of all to literally cut your credit card and revert to using cash only. If you stick to using only cash, you may be able to reduce your spending even more as you may not be tempted to buy non-essential items when you are cash-strapped. You will need to keep in mind that if you do not control your spending to reduce your debt problems, you may end up with a huge debt which you may not be able to settle.

When you fall into a pit of huge debts you are finding hard to climb out of no matter how you cut down your spending and try to pay up each month, then perhaps it may be time that you seek debt help services. One of the ways these debt help companies could offer is through debt arbitration. With debt arbitration, the company will conduct a debt negotiation with your creditors to reduce the amount of debt you need to pay as settlement. If successful, your creditors may agree to have your debt struck off if you pay only a certain percentage of the debt owed them. However, some creditors may not agree to this at all.

With debt settlement, you may need to have a lump sum so that you could make a lump sum payment to your creditors for the agreed settlement sum. However, this may also hurt your credit score even more as the debts may then be listed as ‘partially paid’ instead of fully settled. Again, you may discuss with your creditors and try to get their agreement to list the settlement as ‘fully paid’ so that it may not hurt your credit score.

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Category: Finances
Keywords: debt reduction, debt negotiation, debt settlement