Debt freedom is possible with debt consolidation but that does not mean it is the only thing that you have to do. You also have to learn and practice financial management so that you can stay out of another credit problem. Most people get themselves out of debt but after some time, they find themselves in another financial problem because they failed to learn from the mistakes of the past.
If you got yourself in debt, that simply means you have not been managing your money correctly. You had been spending beyond your means, not putting enough on savings and putting your money on unnecessary things. Even if you work on paying off what you owe, if you do not recognize and correct that mistakes of the past, it will be all for nothing. There is the possibility of getting yourself back in debt once more.
That being said, you know that you have to partner financial management with debt consolidation. Here are the important practices that you have to implement.
First is budgeting. This is different from the payment plan that you will create in debt management or debt consolidation loan. This is the plan that will help you identify your income and the expenses that you make every month. You can arrange your budget to make sure that your total expenses will not exceed your income. If it does not, you can easily arrange it and it can serve as your guide to make sure your spending is within your monthly income.
Another practice of financial management is saving. This will literally keep you from experiencing a lot of problems in the future. In debt consolidation, you will be subjected to a longer payment term so that your monthly payments can be lowered. You need to make sure that you will never falter in payments – especially if you enrolled in debt management. The creditor will agree to the lower payments only if you stick to it. Any lapse could render your plan and the agreement void. Not only that, your savings will eliminate the need to incur more debt. Instead of borrowing, you have your savings to fall back on.
Smart spending is also a must if you really want to practice financial management. This is actually easier to implement in debt management because any credit account that you will enroll in the program will be frozen. That means the temptation of credit card purchases will be gone or minimized. We all know how paying for things in cash can prompt you to make smarter spending. In debt consolidation loan, this is harder to implement and you just have to rely on your self control and discipline. What you can do is to close the accounts that you do not need and keep only one card for emergencies.
All three will help you live within your means and prepare for any event in the future that requires funding. You have to understand that paying off your debts is only one half of the solution. Making sure that you will not land in the same situation again is another.