Debt Management Tips in the U.S.

The key to debt management is identifying your spending patterns and repaying past-due debts as efficiently as possible. Organize your records before you get started so you know exactly where you stand. Be sure to set clear goals for when you expect to be debt-free and seek out financial help along the way if you need it.

Emergency Help

Check whether you're entitled to any help with rent, groceries, utilities, clothing or medical and dental services until your financial standing strengthens. State aid is available to qualifying residents. Contact your state's Department of Social Services and inquire about general relief programs. Depending on the program, you may receive cash aid to offset the costs of your minimum basic needs or medical financial aid for large medical debts. Eligibility for state-funded programs is determined based on your annual gross income and your state's definition of a family. Complete an application and provide proof of income. If financial statements, tax returns and notifications for collections are available, submit these documents with your application.

Budgeting Tips

Develop and follow a financial budget. The purpose of a financial budget is to ensure fixed expenses are paid on time as well as cut extraneous spending and increase savings potential. When budgeting your way out of debt, place a higher priority on fixed costs, such as rent. Since variable costs change as your consumption levels change, calculate an average for variable costs such as utilities. For example, add the totals from three to four electricity bills and divide the result by the number of bills you used in your calculation. Set aside a specific amount for all your essential variable costs. Use cash for out-of-control spending and nonessential expenses like coffee and valet parking.

Paying Off Credit Accounts

Prioritize the order in which you repay your debts. Financial expert Suze Orman advises debtors to place debts in order from highest to lowest interest rate. Pay down debts with the highest interest rates first and then pay off your remaining debts in descending order. Continue to pay the minimum payment on all your balances, so your cards remain current. Once a credit card is paid off, apply the freed-up money to the next credit card. If possible, make a goal to pay off cards with a higher interest rate within a specific time frame like three to six months.

Benefits

Save the lines of credit on your credit cards for emergencies and items you can easily pay off at the end of the month. Having some credit card activity each month can improve your credit score. If you cannot budget a way to purchase a new appliance, for example, save for it instead of charging it.

Once you reduce your dependence on credit cards, apply any money left over at the end of the month toward an emergency savings fund. Having an emergency fund equivalent to six months of expenses ensures that your household will not lose income during short-term emergencies or periods in which you or your spouse have little or no income. Also, if your consumption rate for a variable cost increases one month, you have an emergency fund to cover the costs, which prevents late fees.