Get Out of Debt – What Strategy Makes the Most Sense?

Help!!!! I am on information overload.  Can you look at my financial circumstances and tell me exactly what debt reduction strategy will make the most sense for me?

Sound familiar?  You are not alone.  Thousands of people ask this question every day and set out on the Internet looking for the answer. Unfortunately instead of honest and unbiased advice they typically encounter salesmen that focus more on convincing consumers to buy into their various programs than they do on educating the consumer about the best options available.

debt help optionsIn order to help consumers from falling victim to a good sales pitch that is pushing the wrong solution, I wanted to create a general guideline to help consumers better understand what strategy will make the most sense for them given their unique circumstances. Over the next few weeks I will be writing a series of 6 posts, identifying the common debt reduction strategies and outlining general circumstances in which they could make sense.

The strategies that I will focus on are as follows:

1.  A Debt Snowball approach
2.  A Debt Consolidation Loan
3.  Consumer Credit Counseling
4.  Debt Settlement
5.  Bankruptcy (ch 7. and ch.13)
6.  Doing Nothing

As I write the posts I will be hyper linking the above strategies to their respective posts.  The goal of this “When Does it Make Sense” series of posts will be to help you form a sort of a cheat sheet, to narrow down the strategies that you should focus your research on. Remember though, that this will only be a general guide and you should first ask a qualified financial professional to review your specific situation before making any final decisions.

There are many factors that need to be considered to help narrow your best option down to a specific strategy.  They include, but are not limited to the following:

Debt reduction options1.  Your Current Cash Flow
2.  Your Projected Cash Flow
3.  Your Credit
4.  Your Age
5.  Your savings or lack there of
6.  Your revenue source (ie. do you have a business or are you employed)
7.  The amount of debt that you have incurred
8.  The type of debt that you have
9.  Your attitudes about money and credit
10. Your specific goals that you are trying to accomplish
11.  Your retirement time line and the likelihood of meeting your financial retirement goals

Out of all of the factors listed above, Cash flow is one of the most important when it comes to a specific strategy.  Cash flow is not something that is subjective like your goals or your attitude about money and credit.  Cash flow is what it is.  Certain strategies will simply not work without adequate cash flow.  So before you even begin to research any of the above strategies, you must formulate a realistic budget based on your current and projected income and expenses.  Moving forward with a debt reduction strategy without a REALISTIC (meaning, not your best guess) understanding of your income and expenses, is akin to throwing darts in the dark.  Sure you could get lucky, but you are more likely to miss the board all together.  Once we understand your cash flow we can then easily narrow down the list of the strategies that are available and most likely to work for you.

Remember, this series will consist of general guidelines and should not be used as the sole source of information to determine your best strategy.  Please check back over the next few weeks as I write the posts for each specific strategy.

Have you used any of the strategies listed above to get out of debt? Please share your thoughts and experiences HERE

About Damon Day

As a Debt Coach and a Financial Advocate, I have saved my clients Millions of Dollars by exposing the debt relief scams that other consumers fall victim to. I work directly for my clients to create custom debt relief strategies based on their own unique circumstances. Consumers who speak with me first, come out far ahead of those who don't, every single time. Guaranteed. +Damon Day

10 Responses to “Get Out of Debt – What Strategy Makes the Most Sense?”

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  1. Eser (1 comments) says:

    Hello Damon,

    Thank you very much for sharing your thoughts and highlighting the pros and cos of different alternatives I could be pursuing given the situation i am in. You gathered enough information from me to give me the exact options that may be viable in my case. There were no unnecessary selling of any idea or option, the very fair and candid conversation was most helpful for me.
    Your approach is exactly what you are claiming to be doing no more – no less You answer the questions from a knowledge base and help your listener, me in my case, make an appropriate decision without being forced in any way. This is in 100% contrast with anybody I talked to over the phone and on the web on this matter of credit card dept that I found myself while dealing w unexpected expenses when I have a fixed income.
    Thank you again very much for your genuine interest to help the one who comes to you for guidance. That is exactly what you gave me.
    Best regards

  2. Nick Chertock (2 comments) says:

    Damon: I’m interested in your article on topic #3, Credit Counseling.

  3. Ilyse Klavir (5 comments) says:

    In your comprehensive survey of debt issues, I was personally most interested on how you were going to handle bankruptcy. I didn’t see you dealt with the issue in detail, but I did note that many of the questions you ask of the individual debtor are many of the same questions we ask in a bankruptcy consultation. In general, I think you are approaching debt with the broad view which is necessary to achieving the best solutions.
    .-= Ilyse Klavir´s last blog ..Far From Bankrupt on Ideas- Artist Community in Lancaster- California Wins 2010 AIA-HUD Secretary’s Award =-.

  4. Paul (2 comments) says:

    hello Damon,
    I am at a crossroads where i have a lot (95K) in credit card debt. My wife has 16K and has paid off 2 cards already with snowballing. we also have joint CC for home improvement stores that add up to 20 K.
    I have always paid my CC on time if only the minimum.
    I recently saw a bankruptcy lawyer who suggested because we are married that my wife should be going on the bankruptcy also. We do not qualify for chapter 7, only chapter 13 because we both have good jobs. I worry about both of our credit ratings being botched for years to come, and also for emergencies. I have looked into credit consolidation (wont be too much better) and debt settlement (dont know who to trust) or do the bankruptcy 13 and just be done with it, then rebuild our credit again. My wife is willing to do it with me as long as i learn my lesson…..
    Thank you in advance for your prompt response.

    • Damon Day (116 comments) says:

      Hello Paul,

      I know it can be a very daunting decision. If you are asking me what I think you should do, I would need to know a lot more information about your current financial circumstances and overall life situation.

      In deciding between protecting your credit and getting out of debt, I typically lean toward getting out of debt over protecting your fico score, except perhaps in rare circumstances where your income is dependent on a good fico score.

      Given the current market for credit, and the fact that you appear to be in over your head with debt, you good credit score likely can’t do much for you anyway right now.

      I know filing a Bankruptcy can be a very emotional decision. If you would like me to review your actual financial circumstances and give you a second opinion before you take the plunge, please schedule a phone consultation with me. If I think filing a BK is your best bet after I look everything over, I will tell you. If you have some other options that could also work, I will inform you of that as well.

      Either way, you will know exactly what you need to do after our call.
      Hope that helps.

  5. Nick (3 comments) says:

    Debt snowballing made a lot of sense at the time but is now catching up with me. Need to take a step back and make a new plan with the strategies you outlined.

  6. Jonathan (14 comments) says:

    Excellent article. I think that many of us can relate to needing some valuable input and structure to help us understand our best strategy for dealing with debt. I have personally found that the simple one’s work best, such as not using a credit card and spening only what I have available in my bank account

  7. Barbara (1 comments) says:

    Excellent article summarizing big picture options and strategies. I am a big fan of Steve Rhode, where I found out about your services. Information from both websites has allowed me to narrow down to the options that make the most sense for my situation and focus on the best strategies for implementing them.

    • Damon (132 comments) says:

      Hello Barbara,

      That is great to hear. In the debt relief industry you have to be very cautious. There are a lot more outfits looking to simply separate you from your money than there are companies actually wanting to help you resolve your financial situation. Thanks for taking the time to comment.