Tips on Managing Debt

Consumers who can't manage their debt may consider bankruptcy for starting over. But with the consequences of bankruptcy, it's wise to consider other alternatives. Bankruptcies lower your credit rating and make it difficult to get new lines of credit. Learning techniques for managing debt can slowly improve your situation and help eliminate debt.

Live Within a Budget

Establishing a budget and watching how you spend your money doesn't necessarily mean giving up entertainment and recreation. You can still enjoy life on a budget. Moderation is the key, and this simple technique can avert overspending. Spending too much money on non-essentials can trigger cash-flow issues, wherein there isn't enough money to pay bills and handle other monthly obligations. You're more likely to pull out a credit card in this situation, and this habit can bring on high debt balances. Take your personal bills and monthly income and establish a monthly budget. This budget outlines the maximum dollar amount that you're going to spend on everything from food to entertainment. Stay within your budget to avoid new debt.

Payoff Credit Cards

Alleviate credit card problems altogether by paying off your balances in full each month. Not only does this method keep your debt to a minimum, but also you avoid paying interest on these accounts. Paying off balances in full each month can only work if you limit credit card use. Spend only what your budget allows. And if you do use a credit card to treat yourself to something special, establish a debt elimination plan that allows you to pay off the card within a few months, and avoid adding new charges until you have paid the balance.

Automated Payment

Managing debt and writing checks can present problems if you are a busy person. You may accidentally miss a payment or send a payment late. Avoid late arrivals and possible late fees by using automated payments. Visit your creditor's payment website and link your bank account to your credit account. Supply the account number and choose a date for the automatic draft. You establish the monthly payment amount, and on the day selected, your creditors withdraw the funds from your personal account.

Interest Rate

Start negotiating the lowest interest rate possible on your credit card accounts to pay less interest each month. With cheaper interest charges, your principal balance goes down faster and you're able to payoff the debt quicker. Creditors charge interest to make money on each account. And while some charge reasonably low rates, other may charge rates within the high-teens or 20 percent range. Talk to creditors to bring down your rates. Simply asking for a better rate could possibly get your present rate slashed in half.