Scenario 3

Alas, woe is me and what to do. If this is the position you are in, life is going to be very hard for a while. However, when you are all said and done, it will reflect well on you, your future and your ability to overcome seemingly impossible odds. While this is not going to be pleasant in any use of the term, you are not the first person to be in this situation and you will not be the last one to go there either.

It will be necessary to go through all of your bills and see which ones charge interest and which ones do not. Of the ones that charge interest, you will need to make a special note of the actual amount of interest due and the amount of the minimal balance due. Chances are pretty good that the minimal balance is going to be equal to or just slightly more than the actual interest that is being charged.

This is where it is the easiest to fall into credit traps that will keep you from ever being able to properly manage your debts. Quite frequently, credit card companies especially will make the minimal amount due the simple interest charge that you must pay. By paying this amount every month, you are putting pure profits into their pockets. The principal amount remains untouched and the interest payments continue to grow.

You can make the minimal payments for the rest of your life and never get the bill paid off. While this may seem unethical to some people, it is the means by which these companies are able to earn money and how they generate profits and revenue for their company and the shareholders. This process is not only legal but actually a very common method of doing business.

Again, those bills charging the highest interest rates should be paid off first. Pay the minimal balance and more on each and every one of these that you are able to. If it is necessary, you can concentrate on one individual bill at a time and make the minimal payment and a percentage payment on top of that. The minimal payment will cover the interest owed and the percentage will actually pay off a percentage of the principal amount which is owed. In this manner, you can alleviate a lot of the costs by incrementally decreasing the amount of interest that is actually owed.

When bills are paid in this method, it will be necessary to reevaluate all of your bills each and every month. Paying large percentages of the principal of the loan will vary the amount of interest that is owed and frequently it will alter the percentage rate itself. Care must be taken to keep the minimal payment paid on all of the larger interest-bearing accounts. This will keep the interest owed from snowballing and putting you into a financial hole from which you will be unable to recover.

As the bills fluctuate, so will the minimal payments and the minimal balance due. Some of the interest rates will change and some of them will not. Reevaluating all of your bills every month will help you to keep as much as possible paid up to date so that the bad effects on your credit are limited to as small an amount as absolutely necessary under the circumstances.

While you are doing this, it is still necessary to make what are commonly known as “good faith” payments on all of your other bills. While local laws and regulations vary and you need to check to see exactly how it will affect you personally, in many locales, once companies have accepted any payment, it is seen as an act of good faith on your part to pay the bill in full. Their acceptance of the payment will also usually prevent them from throwing your bills to the collection wolves that will try and attach your wages before you even see your check.

While these laws may or may not apply to you, the very fact that you continue making payments will usually work in your favor no matter what the actual laws are. Even small payments which seem to be inconsequential when the total amount due is looked at objectively can provide you with a world of relief in the long run.

As you work your way through the larger of the bills, you can begin paying more and more on the smaller bills and the bills which carry no interest penalties. This will also help you to pay off all of your debts quicker so that you can begin to rebuild your credit as soon as possible. Remember, debt management does not mean living a debt-free life but being able to manage your debts in order to expand your financial growth and personal wealth.

It will ultimately be necessary to work your way through each and every one of your bills in this manner. A failure to do so will disallow you from ever rebuilding your credit. On a brighter note, the further you get down the road to becoming debt free, the less money you will be paying out each month. While it may take a while, each step you complete will bring new feelings of relief.

As your bills decrease, your discretionary disposable income will seem to increase. While you may or may not splurge on yourself or your family every now and then, you would be well advised to put as much of this money as possible into getting completely out of debt before you begin spending too much. Spending more on other items and less on your bills will continue to cost you excessive amounts of money owed no matter what form it takes.

The quicker you are able to pay off your bills, the quicker you can turn the tables around. Working with your debt and properly managing it should be a rewarding experience, not the trial that you are currently facing. Pay as much as you are able to on all of your bills. It is a good idea to continue paying a large amount even after all of the large bills and high-interest payments are all completed.

Only after the last of all of these debts are paid will you be able to begin rebuilding. There are many steps to rebuilding your credit and working towards managing your debt successfully. The first step is learning how to manage your finances. Unfortunately, for most people this means living on a budget. Fortunately, budgets are not nearly as impossible as many debt counselors would have you believe.