When facing crippling debt and an avalanche of past due notices, a consumer’s thoughts often turn towards bankruptcy, a seemingly traditional approach to solving ones financial difficulties in the short-term.
In many cases, bankruptcy is only a temporary fix, rather than the cure. The underlying problems continue to exist even if the balance sheets are wiped clean. Understanding the factors involved in debt accumulation within the family can help individuals realize where they are spending needlessly or where their largest expenditures lay.
Simply put, consumer debt education is often a key component to any good debt reduction plan. Knowing how to properly budget, what debt traps are lurking, and what expenditures are eating away at your income can help people to live within their means, without having to burden themselves with additional debt.
Families who make a budget for each month and stick to it exactly have a lower amount of debt, fewer late payments, and a significantly lower rate of bankruptcy than families that do not budget their income. A budget is all about knowing what is coming into the house and where every penny is being spent. Keeping track of expenses, including small purchases, can provide a complete picture of where money is being spent and more importantly, where money can be saved.
For example, a family spending $5 per day on coffee in the morning will spend about $100 for coffee during a work week. Instead, a family could purchase a coffee maker and gourmet coffee at home for less than half of that amount. After the first month of initial purchases, the savings could amount to $80 or more each month.
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Once a family learns where they are spending money, they can find ways to reduce their expenses. This type of budgeting enables the family to take money saved and apply it to their existing debt load. Instead of going out to the movies, a family can rent a movie for much cheaper, taking the difference to pay off a credit card or catch up on a past due utility bill.
Finding alternatives is a great way for consumers to understand how to save money and break the bad spending habits that usually lead to debt. By learning how to prevent debt from accumulating and to manage expenses through education and awareness, families can get out of financial trouble and stay out of it.
Educating yourself is the surest way to stop the vicious cycle of debt and the destruction that some families are facing. Using today’s lessons can prevent tomorrow’s debt disaster. If you need any help with getting out of debt, call us today! We are a Non-profit credit counseling agency and our credit counseling sessions are completely free of charge. We are always here to help!