More and more people are being bombarded with collection calls and finding themselves in debt every day. If you’re one of them, there are a few easy steps you can take that can help turn the tables, and debt management can help you take control of your life once again.

Step One: You need to determine how much debt you are in and what exactly you owe to creditors. You should also calculate what your debt to income ratio is and how much your interest rates are. You can create spreadsheets to better organize things and help you stay on top of your debt.

Step Two: You should next calculate what your living expenses are on a monthly basis. In order to reduce your debt, you need to see what you make and what is spent each month. Seeing what you have left at the end of each month can give you a better idea of what you can afford to pay towards your debt. Debt management is based on these two factors.

Step Three: After you have determined your budget as well as what is spent each month, determine if eliminating debt is something that you can do at this point in time. See what your best options are and what can be worked out.

There are a few different options as far as managing your debt and stopping the collection calls. Your first option is to look into other relief options such as debt consolidation. This will allow you to roll all of your debt into one monthly payment. Creditors are paid from the company you are working with, and collection calls cease. This can save you the hassle of dealing with them or dodging their calls. You are going to be able to get your life back and finally live debt-free.

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It has been widely reported recently that 2 of the most well-known debt management companies have gone bust, sending shockwaves throughout the industry. ‘DCM Money Solutions’ of Nottingham and ‘Debt Doctor’ of Somerset both recently announced that their businesses had failed, leaving thousands of clients for whom they had promised ‘debt help’ to in limbo.

One can only sympathise with any clients of these two companies who may have lost money as a result of these collapses. However historically, business failures in the debt management sector have not been common so it is a strange coincidence to see two businesses go to the wall within a month of each other.

Although exact details of the business operations of each of the companies is sketchy at this stage, it is rumoured that both companies operated a system whereby they would pay creditors token payments and build a ‘pot’ up with the remainder to be used as full and final settlements. Sounds like a fantastic plan in theory, as this would help clients to clear their debts much faster than a traditional debt management plan that could take years and years to complete. However, as is all too obvious, this method can carry many risks for any clients who have signed up to it, because if a company that is holding client funds runs into trouble, suddenly client’s money is at risk through no fault of their own whatsoever.

This whole sorry episode has come at a challenging time for the debt solutions industry, as the OFT has already begun a campaign to ‘weed out’ any unscrupulous firms that may be operating in the sector. Could there possibly be a link between the OFT’s investigations and the two liquidations?
One theory as to the collapses of the two companies could be down to the ‘debt management guidance’ as set out by the OFT which was last updated in 2008 and soon to be updated again this year (2011). In the guidance, the OFT advises that creditors should be paid the full distribution of a client’s monthly payment towards their debt plan within 5 days of the DMC receiving cleared funds. If the rumours – and I must re-iterate that these are just rumours – are correct, then this would pose very big problems for the two companies in question. The success of their models depended upon retaining a proportion of the client’s monthly payment in order to ‘save up’ the money for full and final settlements. If the OFT have told these companies that this can no longer be done because it against their code, then those business models become defunct overnight. Could this be the reason why the directors of each of these debt help companies decided to cut and run? Only time will tell

For any victims of this whole sorry episode – the advice is do not despair just yet. ‘Clear Debt’ have already bought the DCM client book and have promised to complete the plans for those clients with no further fees to pay or to switch them onto the less-popular ‘IVA’ debt solution. Although many DCM clients will be left out of pocket, at least they are receiving guidance to help them come through it. Free debt advice is available from charities such as the CAB. There are also some debt management companies offering a ‘rescue package’ to victims of the collapses.

I read Dave Ramsey’s article the other day that totally trash the debt management programs, including debt consolidation and debt settlement, pointing out that these companies are nothing but take your money and ruin your credit, he said, the only way to get out of debt is an old-fashioned way to spend less.

I have to say that some part I agree with Mr. Ramsey and his advice is the same thing that my grandmother gave me when I was younger “. The best way to save money not spend it” There is one drawback that I see is related to the negative criticism toward Ramsey, debt management programs and their adamancy toward the traditional methods of debt help theory. Although it gives you great advice to help you avoid financial problems in the future, what happens if you are a current financial problems?

I’ve worked with people who follow my grandmother’s advice to the T, but one day they lost their job or they got sick relative, they had to take a pay cut, or other incidents. Bills began to back up, and before they knew they had the financial crisis. Those same people are the ones who want to abolish its cell phone services, cut cable, stopped eating and all efforts to scrape together every penny they can. The problem is that many times these efforts simply are not enough, and what they are saved they did not cover the new debt accumulated. For example, cost savings could save an additional $ 300 a month, but the pay cut you are making $ 600 a month less. Even cutting unnecessary costs, you’re still almost $ 300 in purple. So what is my place? Ramsey, a traditional method of debt management is very effective, but it’s not always the answer. Sometimes you need to seek financial support, that is a little more aggressive. In other words, the desperate times desperate measures may apply.

I will be first to admit that the debt consolidation and debt settlement is not for everyone, but they may give customers the extra help they need to keep their heads above water, which makes them valuable opportunities for the number of people. Indeed, if the Ramsey’s financial advice to follow, and the debt consolidation or debt settlement program, he or she may find himself to save more money and get out of debt sooner.

I am by no means advocating a debt management program as an easy answer to financial problems, because it really is, but it is a viable solution for the number of persons indebted. After all, it does take hard work and discipline, that it in any type of debt management program. For this reason, I think Ramsey can be a bit more cynical than those programs that should not be ignored the effect on value. Instead, they should be considered reliable solutions for certain financial situations, because in the end, many consumers have benefited from the debt management program.

On a final note, one thing is very true, but the way you get out of debt, the most important thing is to maintain discipline and good cost happens to keep yourself debt free.