Debt Management: Any strategy that enables a debtor to repay or otherwise take care of their debt better is known as debt management. Debt management may involve working with creditors to restructure debt or supporting the debtor to control bills more efficiently.
A debtor can also appeal to a debt control enterprise if he or she does not recognize how to manipulate the debt himself or herself or if there’s so much debt that outside management becomes necessary.
Debt has a way of creeping up on us if we let it. It’s important to keep our debt at reasonable and manageable levels, or we could end up incurring insane interest charges and scraping to make our payments.
Even for those who manage debt well, unexpected life changes can result in difficulty making ends meet.
When we find ourselves having problems with debt, the first course of action is to take a look at the budget.
Finding ways to cut back on unnecessary expenses can help us pay down debts and keep monthly bills current.
But what happens when we can’t solve our debt problems with budgeting?
DEBT MANAGEMENT AND BUDGETING
Americans usually go about their lives without a budget. Analysts see this as possibly why the average American household is in serious credit card debt.
Most people blame hard times for reasons that they do not make enough money. But the simple truth is, more money does not always solve the problem; more money often leads to more problems.
The real solution to financial problems is planning or proper budgeting.
The good news is that with a little knowledge and effort, anyone can begin creating a budget to reduce their overall debt.
Here are a few more tips to help with debt management.
POPULAR DEBT MANAGEMENT SOLUTIONS
First, stop adding debt upon debt. It’s of the utmost importance that you quit accruing debt immediately.
Use cash for your purchases, not your credit cards. Make it a simple rule that if you can’t pay cash, you don’t buy it. Period.
Sometimes we need outside help. It’s hard to go to someone else when you’re having money troubles, but if you don’t gain control over your debts, your credit rating will suffer, especially with banks. So it’s important to take charge of your debt management before it’s too late.
Some debtors turn to debt consolidation as an answer to debt problems. They transfer high-interest debts to a lower interest credit card, or they put up the equity in their homes to get the money to pay them off.
While these options can provide lower payments, they are not without drawbacks.
Closing numerous accounts and putting all of your debt into one account can negatively affect your ratio of debt to available credit, lowering your credit score.
And if you use your home equity to secure the money needed to pay off debt, you’re putting your home at an unnecessary risk. (Bad idea).
Another popular option for those with debt problems is credit counseling.
Credit counseling agencies offer help with budgeting, and in some cases, they will set you up with a debt management plan.
Read Also: Best Debt Management Companies For 2017
A debt management plan involves negotiation with creditors to obtain lower interest rates and lower payments. The debtor makes one monthly payment to the credit counseling agency, and the agent forwards payments to each creditor.
A debt management plan can help you get out of debt faster, but it can also impact your credit.
A note is added to your credit report stating that you are undergoing credit counseling. This means that you can’t get new credit. However, the notation is removed once you’ve paid off your debts.
It’s also important to make sure you’re dealing with a reputable credit counseling agency. Some charge high fees or fail to make payments to creditors on time.
There have also been some that were found to be outright scams, keeping the money that debtors sent them to pay their bills with, so please watchout.
When considering credit counseling agencies, make sure they’re members of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) or the National Foundation of Credit Counseling (NFCC). These organizations regulate and monitor member agencies, making sure that they operate legally and ethically.
An overabundance of debt can wreak havoc on our finances and our credit scores. It can also be the cause of undue stress.
By seeking help at the first sign of trouble, we can often prevent our debts from spiraling out of control.
In debt management, it is advisable to calculate how much you pay per month in total for all of your expenses.
This includes rent/mortgage, car payments, car/home insurance, utilities, credit card debt, other personal loan debt, food, gas, Internet, cable television, clothes, eating out, and entertainment – everything you might spend money on.
Next, calculate your total income. Subtract expenditure total from your monthly income total. Where do you stand? Are you sitting strongly in the positive, or barely? Or are you down-right in the negative?
If you’re barely in the positive, or if you’re in the negative, my dear friend, it’s time to reduce your overall expenses.
Figure out what you can get rid of and eliminate these expenses.
You might consider contacting a non-profit credit counseling company.
Debt consolidation or debt settlement might be a consideration for your situation.
But your goal here is to reduce your overall debt from your credit lenders.
You might achieve this if you shift your focus from short-term to a longer-term point of view.
You will find that you will eliminate many of your wasteful spending habits.
Furthermore, you may find that you are saving money for a rainy day. It is even advisable you INVEST some of that cash.
Once you achieve this level of financial maturity, you will no longer fall victim to life’s unexpected expenses or engage in wasteful spending.
This is the only way to reach financial independence.
Did you find these lifestyle tips worth sharing? Then kindly share them on social media with the buttons below so your friends can also know about debt management.