Manage Your Debt
How can you manage debt? Many people feel as though debt is truly a nasty four-letter word and for some people it is—when it has gotten out of control and reached epic proportions. Debt in and of itself is not necessarily a bad thing; however. In fact, it can actually be a good thing. Like everything; however, it must be used in moderation. When used correctly, debt allows you to develop a good credit history which in turn helps you to make large purchases, such as homes and cars that most people cannot pay cash for at one time.
The problem with this theory; however, is that many people never learn to manage their debt and before they know it is out of control and ruling their lives. One of the first tips in learning to manage your debt is understanding how credit cards can affect your debt load. A good rule of thumb to keep in mind when considering charging something on your credit card is that if you can’t realistically see yourself paying off the charges within a two month time span, you shouldn’t charge it. The high interest rate on credit cards are the number one contributor to the debt load of most people. Don’t allow yourself to fall victim to this problem simply from lack of discipline.
Reduce Spending To Manage Debt
It’s also a good idea to routinely take a good look at exactly what you’re spending your money on. Ask yourself if you really know where your money is going. Consider keeping a journal to write down everything you spend for a period of time, such as one month, and then sit down to see which categories your expendable income fall into. This will help you to analyze how you’re spending your money and take one step closer to controlling it.
Of course we all know that emergencies can be a large factor when it comes to racking up debt. Something you didn’t plan for pops up and you feel you have no choice but to stick it on a credit card. When you’re analyzing your income and expenses be sure to figure in at least a small amount that you can put in savings for such emergency expenses, even if it means cutting out a luxury item here or there.
Also don’t forget how important it is to pay more than the minimum on the debt that you owe. You may not think that an extra $10 applied to your credit card debt could make much of a difference but in reality if you have an 18% interest rate on a balance of a few thousand dollars, by paying an extra ten bucks you could actually pay off that credit card much sooner than you might imagine. If you manage your debt, you’ll notice the behaviors quickly turn into effortless habits.