Managing Debt

Debt has a way of taking over your life if you don’t learn to manage it. By the time most people decide that they want to get involved in debt management their debt is out of control. Is it too late to implement debt management? No, unless you are in bankruptcy there is still time to get your debt under control.

In order to manage your debt you need to know how much you owe. That is the first order of business. Write down every single credit card, student loan, car payment, store cards and personal loans that you have. If you own a home the mortgage is also part of your debt. You need to write down not only the balances owed but also the rate of interest being paid.

In order to manage your debt you need to know exactly what you have for disposable income you have. You need to write down your weekly, biweekly or monthly income. You also need to know how much tax you are having taken out of your pay.

You now have the tools that you need to start managing your debt. These are the basics for a budget.

Add up the total amount of your debt, also note the amount of the minimum payments required each month. Now write down any other expenses you have, utilities, insurance, and gasoline for your car, cell phones, internet membership dues and homeowner fees if you have them.

Deduct the minimum payments and the other expenses from your disposable income. What you have left is what you have for luxuries and also for the management of your debt.

Saving is normally the first order of the day. When however you have serious debt, the high interest rates that you are paying far outweigh the interest your savings would earn and you need to forgo saving until you have a debt management plan in place.

To begin managing your debt you need to look at the interest rate you are paying. Start with your largest debt which may be your home mortgage. What rate are you paying? In order to qualify for a lower interest rate on your mortgage you need to go to one of the free credit reporting agencies and get a copy of your credit report. If there are mistakes on it you need to know about them and get them corrected. Your goal is to be eligible for a lower rate and therefore a lower monthly payment.

Call your credit card companies and ask them to lower your rate. It can’t hurt and may often help. If you aren’t able to negotiate your rate down consider transferring balances to your lowest rate card or taking one of the many offers that arrive in your mail box weekly. Be sure to read the fine print on any offer you are considering.

It will take time to get your debt under control but it is possible to come out at the end with no debt and your credit score in good shape. Just be patient and stick to your plan.