Tips in Managing and Reducing Your Debts

Introduction

Debt management is the most important things in managing your money. By knowing about your debt will helps you know about your financial situations and make your life easier. You don’t want to live in stress and tension situation thinking about your debt problems. One of the problems that happened nowadays is being in the debt situation. Being in the debt will make your life miserable and guess what? You can get out the debt and reduce your stress.

Debt Management

Nowadays, in the current economy recession there are many people involved in debt problem. According to the Consumer Credit Counselling mentioned that being debt is the most major cause that cause the depression among the adult and this also lead to the stress problems. This report also showed that there are a strong links between stress and debt and almost 90 percent people that involved in the debt are always feel depressed and anxious. The situations also contributed by the creditors that provided the debt for their clients. The creditors are desperately finding the ways to collect the money owned by their clients and this will make their clients pressure to pay back the money and this will lead them to the critical financial status.

There many ways and techniques that can be used in managing the debt. This information also available on the internet and many article can provided the solutions for it. This article will provide an overview about how to manage your debt. By managing your debt will help you plan the budget and help in paying the debt more structure.

What Steps in Managing Debt

 1. Know about Your Debt

This is the most important things first by knowing your debt will help you know about your problems as a whole. You must know how much money that you own from the creditor and how much that it takes to settle that debt. There are many debts such as personal debt, education debt, housing debt, car debt and many more. Analysing the situation will help you plan your debt and manage your money. Settling the high interest debt will help you more focus on your goals for financially debt free. You can also list down every debts that you own with the help of your partner and this will provide a complete analysis about the debt problem that you have. Your partner also will help in identifying other hidden debt that you forget and this important in managing your debt.

2. Pays Your Debts Each Month

Then you must consider to pays your debts each month. You must not ever skipped the payment coz this will make the creditor or the bank charge the interest at your debt. The interest that the bank will charge will depend on your debt. Basically they will charge around   2 percent up to 15 percent if your fails to pay your debts every month. If the bank start charge interest at your debts this will make your debts become higher and hard to settle at the reasonable time. You can also ask your partner to remind you about the payment of your debts and this will make sure that you can pay within the time frame. You can also put in the calendar the date that you should make payment about your debts and stick that date into the place that you always see. By doing this will helps you keep focus and always remember about your debts. Using the sticky notes also helps in this process and tries to sticks the notes at your computer or laptops. This is the techniques that been used by the most people and been recommended by the debt expert. These techniques also you can apply it in paying your credit cards. By paying the credit card every month will help in reducing the amount credit that you own and help in reducing the interest that charge by the bank.

3. Organize Your Monthly Bills

Next steps are by organizing your monthly bills; this can be done by list down the payment that you required every month. List by the looking at the higher interest rates and proceed to the lowest interest rates. Applying this concept will help you monitor the debt that you should settle first. You can also create an envelope about your debts and identify it which ones you should focus to settle. You must also place all your bills in one place. Many of us know about it but fail to implement it. Always try to organize your bills in a place that you know and this will helps you identify the debt that you own. Then, you must also open the bills that you received. If you received the bills by emails or letters, you must always opened and reviewed the bills each month. This is the most important task. By looking at the bills, you will noticed the charge or late fees that occurred in your debts. Or maybe there a good news about the overpaid that you have paid. Always try to opened the bills even though they will brings you a bad news.

4. Make Minimum Payment

Then, you must make a minimum payment for your debts. The minimum payment will help you stay focus and make your credit score good. If you forgot to make payment this will make the bank charge more on your debts. By making a minimum payment also will help you analyse your cash and budget every month, and if you have additional income try to settle it as soon as possible.

By settling the debt earlier will improve your credit and this will prevent more damages on your credit and debts. One of the best techniques that can helps you keep on the spending is by keeping track all the transactions. Make sure to know what amount that you comfortable to pay every month. This will prevent you shocked by the time you checked your credit score.

5. Decide Which Debts should settle First

You must also decide which debt that you must settle first. However there is problems that happened which is which debts should you settle first. There are many techniques that can be used in finding which debt that you should settle first. Firstly, is by looking at the interest rate at each debt, whether it is low interest rate or high interest rates in your debt.

One of the best ways to get rid of the debt is by attacking the highest annual percentage rate first. By settle this you can move on with the highest interest rate. According to the Howard S Dvorking from Consolidated Credit Counselling Services mentioned that by attacking on the high-interest debt first will help you focus and you must pay the double or triple minimum payments. There are an expert mentioned that by listing the amount of the higher debt that you have and try to settle it as soon as possible.

You must try to stick into you plan and by doing this will help you plan your budget and reduce your debts every month. The problems is that most of the people fails to keep track of their plan and suddenly forget to make the payment of their debts and this will damages their credit score in the future.

6. Maintain liquid savings

Then, you must try to maintain liquid savings because this will help you when have emergency such as sick or accident. By maintain the liquidity will help you get the cash when you need most and this also helps in plan the emergency situation.  Liquids saving are those the savings that can be turned into cash immediately. You can save the money at your home or have the specific storage in your possession. This liquids savings will help you when you want to used them immediately. However you should know that this liquid safe is potential to be destroyed such as by fire, misplaced or get stolen. If you have gold, it takes some times for you to convert it for a cash but that can become your financial guarantee when the situation get worse. The same situation also can be seen when you have an assets such as real estate or land transform this asset into cash takes time and required month or years to do it.

The question: What if there was a tragedy or emergency situation that happened in your area and you cannot come to work? By taking the scenarios further, what if your company have financial times and want to closed down and started laying off the work force?

When this happened how can you survive? This is the most important things in the liquidity savings, if you have the money you can survived for several months when trying to finding new jobs. You can also use that liquidity to purchase the groceries or bartered the goods using your emergency liquidity.

The liquid assets that you should maintain depend on your budget. However you must at least have 3 month of your salary as your liquidity savings. This will help you plan your budget and not worried about any problem that occurs when that emergency happened.

7. Watch interest rate from the bank

After that, you must also watch  interest rate from the bank. Most of the bank will always change their interest rate so you must make sure and monitor the interest rate from the bank. The bank also wills simply change their interest rate without notifying you because their want to increase profit from their loans. By knowing the interest rate from the bank will make you know about any new changes that made by the bank and this will also help you plan your budget. If there is new interest rate made by the bank, you must find the new bank that offers low interest rate. You must find the information at the bank website that offers new interest rate that is attractive and suitable for your needs. Then collect all the available offers that have been offer to you by the banks. The bank will always want new customer that used their services because this will keep their business survive and give profit to their business.

Another option you can use is by using balance transfer methods from one bank to other banks. Using this technique will help you monitor the current debt. These techniques only suitable for short term debt and you must make sure that you can settle your debt within the stipulated times that have been given by the bank.

You can also seek another type of debt that available in the market for example seeking new personal loan at the local credit union. Then always try to lower the debt rapidly, try to find additional income or start a business to lower the debt. This will help you pay the debt faster.

8. Always focus on investing your money

Another strategy that can be applied is by investing the money that you received every month. By investing your money will help you generate extra income and can used that money to pay your debt. You can invest 10 percent of your salary every month to generate extra income. This amount has been suggested by the most debt expert however you can also investing more than 10 percent to generate more income.

There are many investment portfolios that you can involve such as unit trust, bon, share, insurance real estate and gold. These types of investment will help generate more than 10 percent profit every year and helps you create more cash in your portfolios.

You can also invest the money for your knowledge for example buying an investment book or financial related book. This will improve your knowledge about the financial management and help you more understand about debt management strategy. There are also lot of workshop and seminar that related about financial management. This seminar will provide and give you knowledge the principle in managing the money and restructure your debt. Try to find the best and suitable workshop that can helps you in the future.

9. Minimize your budget every month

Another strategy that can be implemented is tried to reduce the debt every month. Try not to buy items that not related for you or will give bad implications on your credit every month. Before buying an items try to configure whether that items are important for your need or not. By knowing this will helps you identify what is needs for you or not. You can also cut the cost such as buying new clothes every month, pool the car for works, cook your own food and eat more healthy foods instead of fast foods.

Then you can also seek a discount or any sales that been offered by the shopping complex. There are many discount offered by them to attract the customers. This discount can be offered more than 50 percent.

Next, you can also you coupon that offered, there are many site that offered coupons such as Groupon and many more. This site will give many coupons that will help you many your budget and save your money every month.

Minimize your budget every month will help you create more cash flow for your financial and help you plan your budget.

Conclusion

As a conclusion, it should be noted here that there are many techniques that can be used to manage the debt. The most important things in managing the debt is by creating the plan and get an overview about your debt situation. Then always remember to stick with the plan and not fails to follows it. Most of the people fails to follow this plan and this will make their debt problems become worse and make them stress and suffer in the future.

 

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  70. Debt Equity Ratio Formula
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