Seven Hints for Managing Your Debt

Get started with debt management today

Getting in to debt can be easy. Debt builds up in a multitude of ways - student loans, personal loans, credit cards, mortgages, and more. More than just paying off the cash that you owe, though, managing your debt starts with managing your money. Taking the project one step at a time makes it easier to accomplish. Manage your debt and manage your money with these seven easy steps.

1- Understand your income

Figure out what your income will be over the next week, month, and year. Use commonsense when you estimate your income, especially if you work variable hours. Build in some breathing room by using the lowest number when you have to estimate. Be realistic about your income - it is essential to a good plan.

2-Understand your expenses

Expenses can be described in two ways - fixed and flexible. Fixed expenses are the reoccurring bills or charges you pay regularly. A few examples of fixed expenses are rent payments, electricity bills, and phone bills. Flexible expenses are occasional or one-time costs. Flexible expenses could be one-time costs such as purchasing a new digital camera. Add up your fixed expenses and make your best guess on flexible expenses.

3-Plan a budget

Once you know your income and expenses, write down a budget. Lay out how much money from each pay period you will spend on each bill. Map how much money you have available to pay off debt. Even a small amount of money set aside for savings is advisable.

4- Put your debt in order of priority

Debt comes in a wide variety of types. Each type of debt carries a different cost in the form of an interest rate. When you buy money with debt, you are buying money and paying a fee in the form of interest. Prioritize your highest-interest debt first. Putting an end to your highest-interest debt first saves you money.

5- Build a savings account

It is important to settle your debt. Building up a savings account is just as important. Build a reserve of cash that will cover between two and six months worth of expenses. When you keep a cash reserve, you’re keeping yourself safe from unexpected events.

6- Know your rights

Debt collectors can often be very intrusive and aggressive. Even when you are in debt, it is essential that you know your rights, so keep yourself informed. The Federal Trade Commission and Fair Debt Collection Practices Act are good places to start. You are legally protected from harassment, even if you are in debt. Debt collectors are not allowed to bully or intimidate you.

7- Maintain positive trajectory

Once you have gotten into the habit of tracking where you money is going, keep up with it. You can pay off debt, with a lot of dedication and some time. Keep up the habit - slow and steady is the best formula to follow.