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How to manage the problem of debt?

By Derek Brown
Published: Monday, December 7th, 2009

Debt management focuses on the aspect of making the optimum use of what you have and what you can avail from others without causing you too much of a problem later on in its repayment. Debt never makes anyone happy, howsoever small it may be. For the purpose, you should always look to manage your debt scenario and have a process organized for it availability, management as well as easy and smooth repayment. Get yourself ahead of the debt management problem by planning meticulously further ahead for the future.

Firstly, always keep a count of your debts in your financial accounts. Add up all the money that is owed such as loans taken for car, housing, credit card bill, bank loans, etc., just about all that you got and write it on a list. And then always keep the list close to you for it will constantly remind you of the money that you need to pay off. Also, take care to mention on the list the fact as to what the monthly amount is that you are required to pay each month towards those various bills and loans. Adding all those monthly payments would give you the figure that is your monthly debt amount.

Next make a calculation of your various sources of income and the amount and thus get the monthly income figure. This gives an idea of the situation that you are in with regards to your debt management. The general rule is that a debt situation equal to 30% of your income is considered to be manageable, with anything above 40% requiring professional help.

All this information now provides you with a good idea of the debt income situation that you are in with figures of your monthly income and also debt servicing amounts. It also tells you whether you have reached a limit with your debt amounts and therefore should not borrow any further.

The most important thing for you to do is to pay off the debt quickly and without any further addition to it. Also formulating a plan isn’t enough as you need to stick to it. Cutting back on expenses helps in paying off the debt quickly. Also, pay of the interests first, as it frees money towards paying the basic amount of the debt. This is known as snowballing, the more you pay in each go, and the faster you pay the rest. And thus, very soon your debts will be a thing of the past.

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