Debt Management – Dos and Don’ts
Debt can mount up fast, sometimes catching us off guard. However, there are some Dos and Don’ts on debt management that will help you manage your debt more effectively.
One “Don’t” tip is to never sign for a mortgage or loan before reading everything; especially the fine print. If you don’t read the fine print, you may agree to a loan that has high interest or agree to an “interest only” type of payment. Another “Don’t” debt management tip is to never pay the minimum on your credit card statements. By paying more than the minimum amount required on your credit cards, you will be able to pay off your credit cards in less time and also pay less interest.
In addition, a “Do” tip is to cut back on your spending. Sure, it’s tempting to max out on a credit card, but if you know you can’t pay it off when the next bill arrives, you shouldn’t be using it. Also, if you “Do” have credit card debt, pay it off as soon as you can. If you don’t your interest rates will accumulate and you will be paying off the debt for a very long time. A big “Don’t” with debt management is to not be in denial. Being in debt is a very uncomfortable feeling. But, unless you are willing to face the facts, your debts will just continue to grow.
Another “Do” is to sit down and make a reasonable budget for you and your family. For example, instead of going out for dinner and a movie every week, go out for a dinner and a movie once a month, or make plans for a nice dinner at home, followed by a great DVD rental with popcorn in your living room. An important “Don’t” is to never miss a debt payment. If you miss a debt payment you will get a bad mark on your credit score, plus pay extra in fees and interest. If you feel that you will miss a payment, communicate with the business or organization and make arrangements for an extension.
A “Do” tip is to organize your debts by highest priority. Examples of high priority debt are a mortgage on your home or a loan on your car. These debts should be paid off first because if you don’t, they can be taken away from you and affect your daily life. Then, look at your highest interest rate debt and start paying that off first, regardless of the balance. By paying off the highest interest ones first, you’ll be saving yourself thousands of dollars in interest down the road.
In addition, a much needed “Do” tip is to always seek help if you need assistance with your debts. Talk with a certified credit counselor or financial adviser on how you can pay off your loans. There are many professional non-profit agencies that can help you make responsible decisions that will keep you on the right track.