What is debt management?
Debt management is a topic most people will have to deal with
at some point. Debt is acquired by not living within your means.
Living within your means is simply that you do not spend more
than you make. Debt management is controling and managing debt
responsibly. To reduce or eliminate debt and create a cash flow
that keeps you out of debt is debt management. To completely
control your debt you need to make a budget, reduce expenses and
focus on paying debt. This is the essence of debt management.
To start your debt management program and make a budget you will
need to know all of your expenses and income for a set period of
time. Most budgets are done on a monthly basis. You should
record your monthly income and expenses on a sheet that will
allow you to subtract your expenses from your income. You need
to have a few sections for expenses because there are a few
different types of expenses to consider in your debt management.
Fixed expenses- These are expenses, like rent, that are always
the same amount or around the same amount each time they are
due. These expenses are also ones that must be paid. Good debt
management prioritizes expenses.
Variable expenses- This type of expense changes from month to
month. They are also expenses that you can change the amount of
if need be, like groceries.
Debt- Debt can be either fixed or variable, but is different
because you do not pay the full amount each month. You can chose
how much you want to pay or have a minimal amount you have to
pay.
These three types of expenses should be noted on your budget as
part of your debt management. Once you have drawn up your budget
you need to balance it. Balancing your budget is also a
necessary part of debt management and means that your expenses
do not exceed your income. This is very important in any debt
management program.
You may find that your budget is not balanced. If this is the
case you will need to try to find ways to reduce your expenses.
While fixed expenses are the same month to month and you have to
pay them, there are still ways to reduce the amount. You should
comparison shop to find the best price you can get. You can do
this with utilities, especially extras like cable TV and phone
service. Look at the companies that offer service in your area
and find the one with the lowest price. Variable expenses are
easy to manipulate and this is most likely where most of your
budget cutting will happen. Reducing your expenses will not only
balance your budget, but give you some more money to pay off
debt quicker. Debt management will pay off with a little
planning and self control.
Debt can hang around for quite some item. Most debt comes with
interest charges that just keep adding up. You can try getting a
lower interest rate. By calling the company you have a debt with
you may find they have better payment plans or can offer you
some savings. You should also always make a point to pay more
than the minimum amount due, especially on credit card debt. The
minimal amount due is usually mostly paying interest and not
your actual debt. Be aware of creating new debt also. Pay your
bills on time so you do not get extra charges applied. Debt
management requires that you keep good records and stick to your
budget so debt doesn't get out of control.
Debt management may seem like a difficult task, but if you keep
records and stick to your budget it actually can be easy. Try to
cut expenses and remember to always live within your means. Once
you get a credit card paid off do not start charging again
unless you can pay the balance off in full when the bill comes.
That is the simplest way to stay out of debt. Start your own
debt management program and not only get out of debt but stay
out. Remember, for debt management to be effective you must
stick to your plan.