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How to Manage Your Debt

Most of us have acquired some amount of debt. If you lost your job recently, you may be creating a lot of credit card debt, as a means to pay for things. Sometimes, we go a little overboard around the holidays, and spend more than we planned. Some people have had tragedy strike, and suddenly have to pay large bills for medical care. Whatever the reason is that you got into so much debt is not as important is learning how to manage your debt. Here are a few tips and tricks you can use to help you with debt management.

Make a list of all of your bills

Gather up all of your bills, and make a list, or a chart, of information. Write down the name of the company the bill is for, the amount you are going to be expected to pay each time, and the date the bill us due each month. Include credit cards, mortgage or rent payments, phone bills, utility bills, bills for cable and the internet, car payments, insurance payments, and anything else you owe money to. At a glance, you can now see exactly how much debt you have, as well as who the debt is owed to.

Make a Budget

Next, write down how much money you make each month. Make a list of how much you spend each month on groceries. If you drive to and from work, write down how much you spend on gas and parking each month. If you commute, make a not of how much that costs each month. Do your children attend day care, after school care, or other after school activities that charge a fee? Write that down as well. Whatever is leftover is the amount that you can, potentially, use to begin to pay off your debt.

Where to begin?

There are a few theories about what is the best way to go about paying down your debt. One idea is that you should focus on the smallest debts first. The smallest debts are the easiest to knock out, because they are so small. This results in a feeling of satisfaction, because you just removed one monthly bill from your budget. Now, you can use the money that was going towards this small debt, and use it on a larger debt.

Another idea is to focus on paying down the credit card debts first. In general, the longer a credit card debt exist, the more money it costs you, because these debts come with an interest payment. If you can pay off this debt, you can prevent it from growing bigger, and causing you more problems.

A third idea is to consolidate some of your debt into one big loan, or onto one credit card. The advantage of doing this is that you go from having a bunch of different days these bills are due to just one day. It also gives you one interest rate to deal with. Sometimes, you can transfer debt from many credit cards to one credit card that has a lower interest rate.