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Reduce Debt Stress and Improve Financial Wellbeing

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The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend.

Start by listing your income from all sources. Then, list your “fixed” expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums.

Next, list the expenses that vary — like groceries, entertainment, and clothing. Writing down all your expenses, even those that seem insignificant is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest.

Contacting Your Creditors

Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level.

Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors

Federal law dictates how and when a debt collector may contact you: not before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls.

Collectors may not harass you, lie, or use unfair practices when they try to collect a debt.

And they must honor a written request from you to stop further contact. Learn more from the FTC website about your debt collection rights.

Managing Your Credit Card Debt

Credit cards can be useful tools but if remained uncheck can lead to long-term debt. If you have multiple credit cards with balances, it may seem like a daunting task to pay off the debt. But there are things you can do to manage your credit cards and eliminate the debt sooner than later.

Take a deep breath and get to work. Start with this article: Which Debt Elimination Method is Best to Pay Off Credit Cards? Debt Snowball or Debt Avalanche 

Managing Your Student Loans

Student loans are a special kind of debt that only has a rare occurrence of being discharged during bankruptcy. With federal student loans, you have federal benefits that can give you a reprieve.

Call your servicer about income-based repayment options, forbearance, and deferments.

Opt for income-based repayments which take into account your income when calculating your repayment amount. It can be $0 depending on your financial situation. Call your private student loan servicer about your options when you’re facing financial distress.

Start with this article: How to Payoff Student Loans on Your Financial Wellness Journey

Managing Your Auto Loans

Your debts can be unsecured or secured. Secured debts usually are tied to collateral, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house.

Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back.

If you see default approaching, you may be better off selling the car yourself and paying off the debt: You’ll avoid the added costs of repossession and a negative entry on your credit report.

Managing Your Home Loans

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time.

When you resume regular payments, though, you may have to pay an additional amount toward the past due to total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt.

Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender can’t work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who’s having trouble making mortgage payments.

Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.

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Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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