Whatever be the method of debt management adopted, it must be effective towards debts. The ultimate aim of debt management must be to find a long-lasting solution for debts. Do remember that debt management is only a technique to manage debts. The role played by debt management plans in working with the debts already incurred may not be discounted.
“The most efficient way to produce anything is to bring together under one management as many as possible of the activities needed to turn out the product.”
We often indulge in uncontrolled expenses, and spending beyond our means, i.e., spending more than you earn, results in mounting debts. At times of severe financial crisis, Debt Management helps you manage your funds and protects you from the humiliation of debt struck conditions. The process involving the use of several techniques to curb the number of debts is known as debt management
Some of the techniques of debt management are listed below:
- Create an accurate assessment of your debt situation.
Make a list of all your debts. Be sure and include the amounts, interest rates, and expiration dates to have a clear picture of what you owe and what you own. To assist you in this, get my Debt Destroyer spreadsheet to obtain an accurate picture of your debt situation. This spreadsheet will also assist you with item #3 below.
- Make a budget:
Making a budget helps keep you from increasing your debt while trying to pay it down. Be specific and detailed in your budgeting. Stick to your budget, and you won’t get further into debt if you only spend what you have. I have partnered with Simple Planning who have developed a great suite of spreadsheets to budget and project retirement accounts and much more.
- Pay off the debts one by one.
Maintain minimum payments to the rest of the debts, but pick the debt with the highest interest rate and send extra payments to pay it off. That would help to ease the pressure
- Consider debt consolidation: it is a personal loan that is employed to settle the debts. For ease in the settlement, all debts taken from several lenders are consolidated. You may also consider debt restructuring and refinancing.
- If necessary, get help. You may choose a credit counseling service or debt counseling and debt help service to help with each step of your debt solution.
Debt management is open to good credit people, bad credit people, or people with bankruptcy. Debt management by managing the debts of a debtor can help in improving his credit score.
Debt management will essentially involve keeping one’s finances under control, taking the right debt from the right lender, never missing any installments, avoiding any late fees, and if needed, consolidating the debt most efficiently. Debt management, as is visible, has a very wide scope. Borrowers need to keep their eyes open, particularly on the debt elimination techniques like debt consolidation loans. Debt counseling, too, needs not to be taken lightly since it can also backfire when incorrect tips are implemented.
There is no magic wand as far as recovering from debt is concerned. It takes time, it can be a struggle, but it will be worth it in the end.
