Debt Management Scares Me! SivieAnn Answered

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Why am I scared about my debt management program?

DFA reader SivieAnn asked:

I have fallen behind in all of my bills and being called daily by bill collectors. I have signed up for debt management and will start that next month. I feel terrible because of all of my debt and afraid. I work everyday, but can’t seem to get caught up. I do manage to make my mortgage payment on time and my second mortgage within the time parameters before they tack on a late fee.

I feel scared entering into the debt management program, but feel it is the right thing to do. Your thoughts on this would be greatly appreciated.

Debt management programs are scary

“For God hath not given us the spirit of fear; but of power, and of love, and of a sound mind.”  II Timothy 1:7

Fear is usually closely related to two things:

  1. Feelings of helplessness
  2. Things unknown

The helpless reality of indebtedness

I will assume that feelings of helpless related to your income/debt situation caused you to seek the aid of a debt management company.  I will also assume that you do not yet completely trust the company that you entered into an agreement with.

This raises two questions in my mind:

  1. Did you try to settle your accounts before giving that responsibility to the debt management company?
  2. Did you adequately research the company you entered into the agreement with?

I am guessing your answer to both of these questions will be… “I think so”, “not entirely”, “I’m not sure”, or maybe even a flat out “no”.

When I say, “did you try to settle…” I mean did you really try?  Trying does not constitute a one time phone call to ask for a lower rate, but rather repeated research and communication in relation to you and the companies holding your debt accounts.  When I say, “adequately research…” I mean did you spend days and even weeks looking into the ability, philosophy, and track record of the company you chose?  A five minute visit to their website to read their marketing material does not constitute research.

SivieAnn, I am not being hard on you I am just trying to help you understand why you feel fearful so we can work together to find the best way to take you from a place of fear to a place of understanding and confidence.

Ways to gain confidence and understanding

How can SivieAnn shed her fear of the debt management company and move into a place of confidence and peace with the situation?

  1. Prepare and follow a written budget. SivieAnn, have you ever actually written out a budget and lived according to it?  If not… then you should definitely do so.  Living a financial life of intention leaves little room for fear because you are telling your money where to go instead of wondering where your money is going.
  2. Institute and use cash envelopes. Sure, there are a small percentage of people disciplined enough to realize the benefits of a rewards credit card for all purchases, but the rest of us need something more controlled.  If you have never instituted cash envelopes for spending then do not knock them – my wife and I were amazed by the extraordinary power this system had over our spending decisions.  Do not try to use cash for all spending categories… just the few where they are most appropriate – for my wife and I that is:  groceries, miscellaneous, clothing, dining out, and entertainment.
  3. Study debt management. By this I mean learning how to manage our own debt AND learning what debt management companies are all about.  Figure out how to negotiate settlements with your creditors.  Study debt management companies and learn what they do so you can better understand the situation and alleviate any fear you may have surrounding the subject.  Can you do what they do yourself?  If not… why?  If using one of these companies turns out to be your best bet, figure out which company is best for you and why.  For me the best decision was to simply secure a debt consolidation loan through Lending Club.
  4. Rescind agreement and seek self solutions. If possible, use the education you gained from your research in step four to terminate your relationship with the debt consolidation company you settle with and see if you can take over the process manually with your new found knowledge.
  5. Utilize increased cash flow. I guarantee you that preparing the written budget and instituting the cash envelopes will increase your cash flow.  This increased cash flow, as a direct result of your own responsible behavior, will decrease your fear and helplessness.
  6. Learn to seek God. Shine a light on your fear by seeking Christ.  Pursuing God before money may not make sense to some, but as a man who has lived on both sides of the equation I can tell you that seeking God first is the one true answer that will make everything else fall into place.  You may not understand it if you are standing outside this point of view… but I challenge you to try it before you dismiss it.  I promise you will not be disappointed.  🙂

What do you think?

What are some tips I may have missed that SivieAnn should use to eliminate fear and build confidence and security?

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1 Ann

Go to the library and check out books on personal finance and debt management. Read as many as you can & then get more books and read so more. Education is important.

Also check out PF blogs (such as DFA) for helpful hints & tips, inspirational stories of becoming debt-free, and also for moral support. The last one has been especially helpful for me, knowing that there are MANY other people that are in debt (for one reason or another) & are also working on becoming debt-free, like me. You are not alone! 🙂

2 Lakita (PFJourney)

I would also recommend the National Foundation for Credit Counseling (NFCC.org). Unlike 3rd party debt/credit management companies, they are non for profit which can work in your favor.

Kita

3 karyn

I would also suggest that she keep reading blogs like this one and/or get an “accountability partner”. Blogs like this help me stay focused and motivated. They are also useful for combating fear because you see you are not alone and you have support.

4 Kevin@OutOfYourRut

It sounds as if she’s in a state of panic and maybe not in a position to make sound decisions. She probably needs the counseling of someone she trusts, someone who has some financial sense and could provide solid advice.

This isn’t often mentioned in regard to people with debt problems, but after all the suggestions offered have been implemented she may still have insufficient income to pay her debts and still survive, in which case she may need to find ways to earn more income. That’s where a trusted advisor could really make a difference, helping her to sort out the big picture. She shouldn’t be approaching this alone.

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