Managing Debt
Defense From Your Red Zone

Managing debt once you are in the Red Zone requires a change in strategy. Red Zone debt is serious. Being here can easily accelerate to having no choices but bad ones.  

(Remember winning is keeping more of your money for yourself instead of paying it out to everyone else. Being in the Red Zone means your creditors are winning.)

First, how did you get here?

Has your debt mounted due circumstances beyond your control, such as job loss (or that of a spouse), having your income downsized or unforeseen medical expenses stop your creditors from taking adverse action by pro-actively managing debt. 

It's time to accept the reality of your current situation and downsize to fit your current income. The hardest part of downsizing is accepting that your income level has changed and changing your lifestyle to match it. 

Pay particular attention to your housing costs compared to your current income. This is may be the hardest area to deal with as you may finally be living dream home and now cannot afford to live there anymore and still pay your other obligation. Hard times, call for hard decisions. Starting again is easier with some of your credit intake than after it is in ruins.

Review all of your expenses and start cutting everything that is not absolutely needed. Getting out of debt or at least to manageable level needs to take priority. 

emember, whatever you have to cut does not have to be forever. Once your debt is paid off you may be able to add them back.

Not able to make the payments? Some options are explained below.

Or, have you just made bad decisions.

Bad decisions like spending more than you earn to keep up a lifestyle that you cannot afford or by purchasing whatever you want rather without a plan for paying for them will eventually result in financial collapse.

Stop pretending and face facts. Eventually, you will run out of lines of credit and the cash flow to make payments. Make a realistic budget and begin managing debt so you can get out of the red zone. 

If you have been managing debt making by just making the minimum payment, stop using your credit cards and start a debt roll up  plan right now! 

If you are not able to make all of the minimum payments on your debt, review you options and take action. Ignoring debt repayment is not a solution, if you do not take action your creditors will.

Getting out of the Red Zone one way or another gives you the ability to choose where and how you spend or save so you can change the score towards your favor. Life may not change right away, but the momentum can change in your favor.

Second, understand what type debt you have.

Most fixed debt creditors will take a full month payment plus the late charge. Some, particularly mortgage companies will not and will send the partial payment back to you. Send it anyway. You never know they may accept it.  

Most credit card companies usually accept whatever you send them. While making these payments will help; they will not turn the situation around until the amounts required are paid full.

Third, know how far behind you are. 

Ignoring your mail is not a solution to managing debt.

Review Your Options:

Credit Counseling

Negotiation

Bankruptcy

Go From Managing Debt back to Making a Budget