Get an Accurate Financial Picture with Credit Counseling

In order for a credit counseling service to help you, you'll need to get your credit information together. Who you owe money to, how much money, the account numbers, and the payment information are all important. If you're behind on your payments, make note of how far behind and what you'd need to do in order to bring your payments current.

Once you have all your credit information, your credit counselor will adjust your monthly payments and annual percentage rates to the creditor's guidelines on your debt management plan. They will consolidate your payments into one monthly payment that usually has a lower interest rate than your original creditors were charging. But the debt management plans are for your unsecured debt, like credit cards; money you owe that isn't held with a lien or title.

So what about your other debt?

Regardless of what type of debt you have, before you can choose your options you need to get an accurate picture of your finances.

Income and Expenses

Your counselor will guide you through a budget by asking you how much you pay for living expenses - beginning with fixed expenses such as car payments, rent/mortgage, property taxes, and homeowners insurance.

Then he will ask for your basic expenses such as haircuts, childcare, groceries, utilities, gasoline, entertainment, work lunches, school lunches, cable TV, car insurance, school tuition, cellular phone/telephone, alcohol/tobacco, medicine/glasses, church/charity, alimony/child support, clothes/shoes, and lessons/hobbies.

Your counselor will list your periodic expenses such as holidays, car maintenance, home maintenance, doctor, dentist, and orthodontist, as well. A lot of people forget about these expenses because they don't deal with them every month - but these things still cost money.

The counselor will ask for your salary and wages and any other sources of income, such as alimony or child support.

You must tell your counselor all of your income and expenses to get an accurate financial picture. It's temping to lie because you feel embarrassed by your debt problems, but being honest is the best way to get the help you really need and get back on the right financial path.

Surplus or Deficit

Your counselor will total all your living expenses and subtract that sum from your household income. Then he will subtract the consolidated monthly payment to the creditors. You will most likely be left with either a deficit or a surplus, since budgets rarely balance on their own.

Ten percent either positive or negative is workable; anything over ten percent will greatly narrow down your options. If you have a large surplus, you shouldn't have trouble paying your bills, so you have probably left out some expenses. If you have a large deficit, you need to try to budget down or bring in more income, because you may not be able to pay your debts, even with help from the credit counseling service.