Upshots of credit counseling and financial planning dexterity

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Upshots of credit counseling and financial planning dexterity

 

Credit counseling was able to gain prominence in the last few years working to counteract the ill effects of constantly multiplying worldwide financial crunch and debt woes. With the debt burden-increasing manifold for the people in the US, credit counseling can prove to be helpful enough for at least some of the debtors. However, simple credit counseling may not be enough for one and all to stay away from debt or even do away with the debt problems they are already into. It is equally important to work on designing a proper financial plan. Financial planning can help you in detecting any financial problems coming your way.

Credit counseling and its gratifications

It is a well-known fact that your credit report speaks volume about how financially disciplined you are. It records your financial activities and all your monetary movements. It is very important to maintain a good credit score, which is also consistent. A credit counselor is a person who will educate you to manage your cash better. The counselor will provide useful guidelines so that you don’t fall into a debt trap.

With so many disadvantages of having a bad credit score, it is important that you learn to control your expenses. However, your credit rating may not get ruined because of your own fault always. You may have to face several unforeseen events that can compel your finances to go haywire.

When you take a credit counseling session, the credit counselor will study your financial condition well. Few of the factors that are taken into account by the credit counselor include-

  • Your outstanding debt amount
  • The interest rate you are paying currently
  • Your monthly/annual income
  • Your monthly financial obligations
  • The number of debt accounts you have
  • Your debt-to income ratio etc.

 

Simple credit counseling may not be enough for one and all to stay away from debt or even do away with the debt problems they are already into. 

 

The factors mentioned above will also determine the type of debt solution that will help you get out of debt. Once your credit counselor is well acquainted with the details of your finances, he suggests the debt help option for you. It may be a debt consolidation program, a debt negotiation plan, debt management or bankruptcy. Credit counselors charge fees for offering their services. To avoid falling into trap of fake credit counseling agencies, it is always better to take help of a credit counselor approved by the government. There are free credit counseling companies also and before you take their help, make sure their credentials are right.

 

Preponderance over financial planning

Financial planning is an indispensable part of your finances. Therefore, you would be required to:

¶      Design a realistic budget – Budgeting perhaps is the most essential approach towards financial planning. It is important for everyone to work on budgeting. However, effective financial plan would require you to pen down your budget. This helps in clearing the picture with regards to your total income and all of the expenses too. Budget is one of those tactics that helps you in spending money wisely. This is because, a proper budget provides you information on the items you are expending on and this can be helpful enough for you to realize if you actually need to spend on that particular item.

 

A proper budget provides you information on the items you are expending on and this can be helpful enough for you to realize if you actually need to spend on that particular item.

 

¶      Saving for retirement – You either may not have a proper job or the company you are in may not offer a full pension plan. Therefore, it’s necessary for you to start saving for your retirement. So, your main aim should be to keep aside a certain amount before starting off with the required monthly expenses. This should be considered as a high priority job, even if the expenses seem to grow large. In that case, you will have to try and earn more. There are various retirement plans (these ones US specific) like that of the 401(k), IRA, Roth IRA and so on.

 

These are the two main principals of financial planning. In addition, you will also have to try and avoid incurring unnecessary debts.

 

About the Author:
Grace Ruskin is a contributing financial writer of Financial Solutions Hub. She provides Information on finance and debt related issues.