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Many people use credit as a way to make purchases, cover their basis in an emergency, and take family vacations. This of course is ok, but when the debt gets completely out of hand is when one has to be careful and begin to analyze the financial situation. Many people get in over their heads and can not pay back all the credit that they have begin given by creditors. Payments begin to default and the creditors start calling to see why is it that you are not making payments towards the principal amount.

Hard times fall on all people, and you can always use some advice when it comes to your finances. If debt becomes a problem and you begin to get those phone calls from collection agencies, it is time to start changing some things with your finances.

Following are three ways that you can help yourself and begin to consolidate your debt. Many times it just takes a little self discipline and some good advice to get your self out of financial disaster. More importantly, learning how to manage your finances for the long term is the key to financial success. Use these tips to help you make the first steps towards debt consolidation and a clear financial future.

1. Develop a Budget

Developing a budget is the first step toward taking control of your financial situation. A budget requires first to assess you total income from all your sources and total expenses. You can start by determining your fixed expenses that occur every month, such as mortgage payments or rent, car payments, and insurance premiums. You then would want to determine your varying expenses, such as entertainment, recreation, and clothing.

Writing down every expense, even those that seem insignificant such as a latte or sandwich, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. By doing this, you should be able to see how much you can really afford, without using credit. All your basic needs should be taken care of such as food, housing, insurance and health care.

Check your local library or bookstore to find books that can assist you in financial management. You may find helpful computer software that can help you keep your money organized.

2. Contacting Your Creditors

If you are having trouble making your monthly payments, contact the creditors and let them know what is going on. Don't ever let a letter or phone call from a creditor go unnoticed. This can make it seem like you are avoiding the responsibility, and they may be less likely to work with you. Very often you can renegotiate terms and make payments more manageable so that you are not defaulting on payments. Address the issue quickly so that your account does not go to debt collectors. If you take responsibility for your payments, creditors may work with you so that you are still working to pay off the debt, but just in a more manageable fashion.

3. Managing Your Auto and Home Loans

Always manage your auto and home loans to avoid major problems. Many automobile financing agreements allow a creditor to repossess the car if your payments are in default. If you allow your car to get repossessed, then you may have to pay off the loan, as well as pay for the towing and storage costs, amounting to hundreds of dollars. Your car may even be sold by the creditor.

If you are in fear of default, sell your car or speak to the creditor about your situation. Avoid getting your car repossessed so that your credit report does not get a bad mark on it.

The same goes for your mortgage loan. If you fall behind, contact the lender immediately and see if they can reduce or suspend the payments temporarily until you can get back on your feet. You may have to pay additional costs after you resume payments, so be sure you know how much more before you make this decision.

Controlling your debt is a great way to build your credit and make steps toward having a clear financial situation. Try these things first, and see if you can't pay back your debt if you are more organized and disciplined. You can entertain debt consolidation and employ the services of a financial advisor to help you further.