Debt Management Tips
Personal Debt Management Tips
Saddled with student loan debt? How about tax debt? Thinking about debt consolidation loans? What you need are proven ways to reduce or eliminate your debt.
You're not alone, with the quantity of consumer debt on the rise, a lot of people are searching for strategies to enable them to manage their debt and in some cases eliminate it.
Excessive credit card debt can lead to ongoing financial problems within a household. But, there are proven debt management tips that when followed, have allowed many individuals to go forward living debt free.
Different Types of Debt
Before we move on to discuss debt management tips for reducing credit card debt, it is important to understand the difference between positive and negative debt.
Some forms of debt can be considered positive or financially beneficial, while others are not. Positive debts are those that hold possibilities for increasing a person’s net worth, commonly referred to as leverage.
When you utilize someone else’s capital to purchase a business, a home or even for an investment strategy, it is commonly referred to as leverage. The goal for leveraging capital is to build personal wealth.
Mortgages, car loans and even student loan debt are considered positive debts as they serve a short or even long term financial purpose.
Credit cards and consumer loans however are considered negative debts. Excessive credit card debt creates ongoing and rising interest payments that can become prohibitive to reaching other financial objectives.
If you have incurred excessive credit card debt, there are debt management tips that you can implement that will enable you to reduce or even eliminate credit card debts over time.
Debt Management Tips Plan
To develop a debt management tips plan, begin by creating a list of each of your debts, including the amounts owed, the name of the creditor, the interest percentage rate, and the minimum monthly payments. Then, rank the debts in order beginning with the highest interest rate debt.
Call each creditor to begin negotiating the rate down on each of your credit cards. Be polite, but firm and explain your situation calmly. If it doesn't work the first time, then make a note of it and move on down the list of credit cards. You can try again later.
Reorganize all of your debts in the order of the new interest rates, starting with the highest rate card and ending with the lowest.
Determine how much money you have left at the end of each month after all of your bills and expenses are paid. To do this, you'll first need to develop a budget. See
How to Make a Budget
for excellent tips on how to develop a household budget. Now, this left over money after all your bills and expenses are paid is discretionary income. You'll use this discretionary income to help eliminate debt.
If you don't feel you have any discretionary money, then you'll need to take a serious look at where your money is going. You'll also need to scrimp, save, look under the couch cushions, etc. for extra money. And, if your debt is that bad, sell anything in your home that's not bolted down to pay off your debt.
Really, a less painful way to find discretionary money is to take a serious look at what you're spending your money on. If you're in debt, then you should not be going to the movies, taking the family out to dinner, etc. And, yes you can still have fun with the family and not spend money. Use your imagination: have a game night at home, go to the park, play poker and bet with cookies. In other words, do whatever you've got to do to find that discretionary money to pay off your debt and eliminate the stress that it brings.
Moving on... beginning next month, apply your discretionary money to the highest interest rate debt. Continue to pay the minimum amounts on the other debts.
Once your highest interest rate debt is paid off, apply the total amount that you were paying on the debt with the highest interest rate toward the second highest interest rate debt.
Continue this pattern until you are able to pay off all your debt.
Another option to eliminating debt are debt consolidation loans. These loans take all of your debt and combine them into one loan typically with a lower interest rate and payment than the original debt. They are beneficial in that they allow you to make one low monthly payment versus several payments on your debt.
A lower interest rate on your debt means you are applying more money to the principle balance with each payment and your debt will be paid off quicker.
Debt consolidation loans are a great option, but can be a slippery slope if you're not careful. I mention that these loans can be a slippery slope only because by consolidating all of your debt into one loan, you free up available credit. Meaning, you can go out and charge up those cards again! So, if you decide to use this debt management tool, just be disciplined and don't use those credit cards to rack up debt again!
If the idea of debt consolidation loans scare you, then go the traditional payment route mentioned above, but first negotiate the interest rates down on your credit cards as much as possible.
If you're truly uncomfortable talking with your creditors about your situation, you may want to seek the advice of a debt settlement service. But, just remember, they're in business to make money too and you could be paying off debt with the money you'd be paying them. Besides, you have a voice of your own, it's your debt, and creditors will genuinely want to work with you if you put forth the effort.
These debt management tips will allow you to eliminate credit card debts quickly and efficiently. By working through this process, you can be well on your way to living debt free a lot sooner than you think.
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