Is Debt Consolidation Right For Me?

If you are wanting to improve your credit standing and recover from a period of bad debt, you are going to have to evaluate just how well you can pay your bills, on time of course, and get back on the right track. Debt consolidation may be a move that you should consider and may be just the ticket you need to gaining back control over your financial situation. How can you determine if debt consolidation is right for you?

In this article, we will tell you exactly that. The best way to get a real grasp on your current financial situation is to get a clear picture of how much money you have and just where it is going. You have to do your homework. Well, ok so you have been out of school for several years, but you have not forgotten basic math, have you? Of course not! Grab yourself a piece of paper and a pen, get ready to do some number crunching.

For two months either the proceeding two months if you have kept every receipt for every dime you have spent or the next two months, you need to write down every detail of every bit of money spent. Everything, from every trip to the soda machine, to each time you put gas in your car, to every time you buy groceries, pay a bill, or buy anything. When money leaves your hand, checkbook, or credit card, it needs to be recorded.

After doing this, get out the trusty calculator and add up how much you have spent. Now, you also need to gather all of your debt, this means credit card statements, loan coupons, mortgage coupons, anything you owe money to, write down the minimum payments you are required to make for each one. When you come up with a grand total, do the same for your income sources, and add them up.

If you find that you pay your minimum payments times two (double) and still save at least 10% of the total income you bring into your home, you are pretty well off. However, if that is not the case, you may need to consider debt consolidation.

Now if you do need debt consolidation, you are going to have to eliminate some of items on that list you kept for two months of everything you spent. Why? Because it is obvious you are living outside of your means. You will have to take control over your money and until you are in a better position forgo some luxuries. It may not mean all luxuries, but do you really need the most expensive cell phone plan? Are you actually going to watch 500 cable channels? How about going out to eat all the time, could you cook at home? It is important, in order to make debt consolidation work and actually help, that you reorganize your life and priority, otherwise, you will find yourself right back in the same position yet again.