Money Talk Daily

Debt management and getting started

Getting in to debt can be easy. No matter where the debt comes from – student loans, personal loans, credit cards or a mortgage, debt can pile up quickly. Managing your money is the first step in managing your debt and paying off what you owe. It is easier to accomplish large tasks such as this when you break it into small steps. Get started managing your debt today with these seven simple suggestions.

1- Understand your income

First, sit down and determine exactly how much money you will have coming in over the next week, month and year. Use commonsense about your income, especially if it can be variable. If you aren’t sure and need to use a ballpark figure, use a low number to give yourself some extra room. Be realistic about the income you can expect.

2-Understand your expenses

There are two forms of expenses – fixed and flexible. When an expense is reoccurring, consider it a fixed expense. Vehicle insurance and mortgage payments are both fixed expenses. Non-reoccurring expenses that do not have a fixed cost are considered flexible expenses. One-time purchases, such as clothing, can be considered a flexible expense. Record your fixed expenses and make your best estimate of flexible expenses.

3-Organize your budget

Plan your budget once you have a good understanding of your income and expenses. Ascertain the amount from each paycheck you will allocate towards each bill. Sketch out how much cash you can put towards paying off your debt. Make sure you leave some money for savings, even if it is a small amount.

4- Prioritize your debt

There are many different types of debt. Differing types of debt carry different interest rates. Taking on debt allows you to buy money when you need or want it, and interest is what you pay for that cash. Work out a way to pay off the highest-interest debt first. Putting an end to your highest-interest debt first saves you money.

5- Create a savings account

It is important to settle your debt. Creating a savings account is equally important. Create a reserve of cash that is enough to pay between two and six months worth of bills. You can know that you will be more able to handle unexpected expenses when you have a cash reserve.

6- Recognize your rights

When they are trying to collect a debt, credit collection agencies can be aggressive. It is important to know that even when you are in debt you have rights, so educate yourself. Begin informing yourself by checking out the FTC and Fair Debt Collection Practices Act. Even when you have debt, you are protected with rights. Debt collectors are not allowed to bully or intimidate you.

7- Enjoy positive habits

Once you have gotten into the habit of keeping track of your money, keep doing it. When you stick to your plan, it is possible to pay off debt. Keep up the habit – slow and steady is the best formula to follow.