Many of us grapple with debt in the course of our lives. In some cases, this debt can be managed through budgeting discipline and a commitment to making timely payments.
However, debt can also balloon to unmanageable proportions—whether we’ve gotten carried away with spending or fallen on hard times. That’s especially true since interest can continue to mount even while you’re consistently making minimum monthly payments.
If you’ve reached a point where you no longer feel in control of your debt, it may be time to course-correct—and seek help.
Analyze Your Debt—and Do Your Best to Stop Adding to It
As a first step, it’s wise to contain your debt problem as best you can. If most of your debt comes from installment loans—like student loans, car payments or mortgages—then you have a clear picture of its origins and can generally calculate the timeline for paying it off. If it’s coming from your credit cards, then you can analyze your spending to see what you might be able to control by altering your habits.
To the extent possible, try to avoid charging new expenses, especially on high-interest credit cards. Then prioritize your credit card repayments by focusing on the cards with the highest interest rates, as these are likely costing you much more than the initial amounts you charged. Making minimum monthly payments is a good place to start, but if you can pay a bit extra, you can make more of a dent in your balances.
Explore Your Options
There are multiple ways to approach debt management, including consolidation and bankruptcy. There are pros and cons associated with each option, so it can be helpful to speak with a financial professional, such as a money coach or debt counselor, who can help you take an objective look at your situation and evaluate potential impacts.
Several non-profit agencies have been created to assist people with debt. In the U.S., the Federal government recommends working with credit counseling services that have been accredited by either the National Foundation for Credit Counseling (NFCC)1 or the Financial Counseling Association of America (FCAA).2
In addition, free or low-cost debt counseling can often be accessed through credit unions, community groups or religious organizations.
Talk to Your Creditors
If you’ve looked into your options and still find yourself unable to make the minimum payments on your loans and credit cards, try contacting your creditors. Often, creditors will allow you to explain your situation—and your plan to get back on track—and may revise your loan terms, temporarily suspend interest, or accept a lump sum that is less than the amount you owe. That’s because many of them would rather receive some payment than risk not receiving anything if you file for bankruptcy.
The Bottom Line
Debt is a significant issue for many people, but it is possible to get it under control—and there is plenty of help available. Know that you are not alone in facing this challenge, or in tackling it.
This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
By providing links to third party websites or online publication(s)/article(s), Morgan Stanley Smith Barney LLC ("Morgan Stanley") is not implying an affiliation, sponsorship, endorsement, approval, investigation, verification with the third parties or that any monitoring is being done by Morgan Stanley of any information contained within the articles or web sites. Morgan Stanley is not responsible for the information contained on the third party websites or your use of or inability to use such site. Nor do we guarantee their accuracy and completeness. The terms, conditions, and privacy policy of any third party web site may be different from those applicable to your use of any Morgan Stanley web site. The information and data provided by the third party web sites or publications are as of the date when they were written and subject to change without notice.
