Initial Steps in Debt Management
Step One – Establish an Emergency Fund – debts can pile up very fast each month and within a very short period of time you can get lost in your timings and transactions especially when it comes to due dates of different loans. It doesn’t really matter how hard you work or the number of overtime hours that you take each day of the week, your debt will keep piling and piling until the time you take wise financial decisions. This decision is simply to put your hard earned cash where it will make the most impact on your financial status, but where do you do that? There are several ways you can formulate a plan on wise use of money with some professional financial experts, and when the worse comes to the worse you can consider debt consolidation or even decide to declare bankruptcy.
Step two – choose to consolidate your debt with an emergency fund – the need to establish an emergency fund first before you start to manage that heap of debt that you have can never be overemphasized enough. If you are struggling and fighting a huge debt from credit cards and other credit lines, you might want to first consider setting up an emergency account which will act as a sort of parachute. This kitty will serve as a safe fallback for you in you can rapidly recover from a mistake of overpayment or even worse.
Step three – determine the size of your emergency fund – you are the one who can determine the size of your emergency fund, whether you want it to be as little as $500 or as large as thousands of dollars, it is all up to you. The main reason for having such a fund is so that you can be able to pay for any shortage or emergency that could arise in the course of your reducing your heap debt. The most critical factor to keep in mind here is that you have to feed the emergency fund even as you ‘feed’ your other debts each month, remember this emergency account could come in very handy any time circumstances force you to dig into it.
Note that this emergency fund isn’t an all-inclusive-pay-for-anything emergency fund kitty; it is only there so that in case of anything you can be able to fall back and get some finances to keep you and your family going and forging ahead until you know how to manage your huge debt.
