How to manage your debt properly?

Manage debts with consolidation loans

Manage debts with consolidation loans

Managing your debts is important regardless of your financial situation – only by being aware of what you are paying and how your debt is structured will you be sure of not running into any problems in the future and also sure of not spending money on expensive loans that could be easily converted in to cheaper long term loans.  Here are some of the things I did to get my debts under control:

Always know who you owe money to – and how much

This means keeping track of all your creditors – including stores where you have shopped on credit and all credit cards you use.

Put them in a spreadsheet and list the amount you owe in the column next to each creditor.  At the end sum up all the debts you have.  This may be a bit of a nasty shock if you haven’t been keeping proper track of your debts so far.  Don’t worry – it is better knowing the facts than pulling wool over your eyes.

Always knows your borrowing terms (interest rates and fees)

While you are working on the spreadsheet, make sure to also add in the interest rate and fees you are paying and your monthly payments.  Try to identify any debt that seems to carry very high costs.  You may be able to consolidate some of this debt into a cheaper bank loan.

Make sure you pay you bills on time

Late payment fees can be very expensive.  Not paying a bill because you don’t have the money is one thing – it is a serious problem that we are trying to help you avoid on these pages.  But not paying because you forget or don’t keep track is just plain stupid.  Late payment fees can accumulate to hundreds and even thousands of dollars over time!  And many financial institutions may increase your interest rate if you don’t pay on time.  I ended up creating a monthly bill payment calendar to make sure I never wasted money on late payment charges.

Always make at least the minimum payment

If you cannot afford to pay off anything more, then at least make the minimum payment for your debt.  This won’t actually reduce your debt as such, but at least it keeps it from growing.

Build up an emergency fund to fall back on

As soon as you have any money to spear, use some of it to build a fund to fall back on, should you suddenly receive a surprise bill.  It will prevent you from having to take out expensive short term loans.

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