Most families have a little bit of debt they have to deal with. Unfortunately, it’s not uncommon to lose control over finances. If you find yourself in any kind of financial trouble, it’s time to develop a debt management strategy. How can you pay your debts back? How should you prioritize them? Should you consider consolidation? Or even bankruptcy?
Here are a few tips for establishing better debt management:
• Make a list of all of your debts and how much you owe each. Organization is essential. On the list, information should include total amount of debt, the name of the creditor, minimum monthly payment, and due date. Having it all listed right in front of you allows you to see the bigger picture.
• Prioritize your debts. Obviously, things like home loans, child support, auto loans, and IRS back payments should come first, since these types of debts hold the biggest consequences should you be unable to pay. As for credit cards, pay the ones with the highest interest rate first since that rate will keep getting higher and higher if you get behind.
• Once you have your debts prioritized, make any necessary sacrifices in order to pay at least the minimum amount. While only paying on the minimum won’t reduce the debt very much, if at all, it will still prevent it from going up any.
More Tips for Debt Management
• Try to save money as much as you can. Do you really need to go out for lunch every day? Do you really have to take the car to a place that is within walking distance? Are there any entertainment expenses you can cut, like a Hulu or Netflix subscription? Do you really need all of the channels on your TV? Even if you only cancel entertainments for a couple of months, it can really help you catch up on debts.
• Recognize signs that you need help. Debt management isn’t always something one can do all on their own. There are management and consolidation companies that will help you keep your finances in order. There is also bankruptcy to consider if things really get out of hand. If you simply find that you have too many debts and too little money to meet the monthly payments, it’s time to seek professional assistance.