The FTC has a great resource about how to: 1) avoid getting into debt; and 2) resolve being in debt.
1) Develop a Budget
Figure out how much money you can realistically spend on a monthly basis for each spending category in your life. We’ve found that you can break your budget into several categories:
a) Food & Entertainment
b) Personal Spending (RX, Personal Health, Lunches, Shopping, Cell Phone)
c) Household Expenses (Utilities, Repairs)
d) Mortgage, Insurance, and Taxes
2) Contact Your Creditors
You have a relationship with your creditors and you need to show that you can respect this relationship by working with your creditors and pay your debt. If your debt is out of control, it might make sense to settle credit card debt as opposed to paying the full balance. In other circumstances, it might make sense to consolidate your debt into one monthly payment.
3) Manage Your Auto and Home Loans
If you fall behind in your payments, you need to realize you may risk losing your car or home. If you’re behind on car payments, you’re car may be repossessed. You want to make sure you avoid this problem by talking with your auto loan company if you fall behind on your payments and work out a plan that works for both you and your auto loan company. If you’re behind on your home loan, the process for foreclosing on your home is a long one that banks most certainly want to avoid. They will work with you to work out a plan that will work for you, assuming you ultimately keep true to the original agreement.
