Can you Really Manage your Debt?

October 14, 2008

The idea of managing debt isnt quite accurate. For most people, debt is only manageable if kept in tight control. For example, most people more than able to handle their mortgages, auto loans and student loans. But when you throw a credit card into the mix, things go crazy.

Debt is a way of life in America. It is easy to get money when you need it. No one stops to think about how huge a business credit really is. It is very profitable for lenders.

And for several borrowers out there, debt hasnt been a good thing. Theyve purchased nice homes that were affordably priced. Theyve learned how to manage debt.

But for so many, debt isnt manageable. This group of people includes those that spend more than they make. That means you have to borrow money. So many people buy what they want without any need for it. They dont understand that if they cut their spending, they will increase the amount of money they have.

I know that life happens. Debts accrue. If you have trouble dealing with your debt now, you need to pay it all of and never go back. In fact, most people benefit from having no debt. No debt payments to make, less stress and more of your money stays with you.

So, how do you start to manage your debt? For starters, there should never be a time that you dont know exactly what you owe and to whom you owe it. You should always know how much you have in the bank and even how much cash you have in the cookie jar. Start with a budget. Write down all of your debts, your monthly expenses and other various bills. Subtract this from your income. You should have money left over to allot to groceries, transportation, entertainment, savings and debt repayment. If you dont, you need to start cutting some of your bills out or find a way to increase your income. It is easier to spend less than it is to make more.

Start with paying off your credit cards. This is your number one priority, but you should still pay your other bills too. Cut up the cards and dont charge another dime. Sit down and figure out a debt repayment plan that will work for you. I recommend the snowball method, starting with your highest interest rate cards and working your way down the list.

Most financial advisors will tell you that the only reasonable long-term debt is your student loan and your mortgage. And even then, you should work to pay these off as quickly as possible. For every extra payment you make a year, you could be saving tens of thousands of dollars in the long run. Make your purchase decisions wisely. Remember, every dollar you spend on credit will be hundreds later on in interest payments.

The goal is to get rid of those debt payments and put the money back in your pocket. Then you will be truly managing your debt

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