Objectives of Debt Management

Some people spend blindly from month to month, never knowing where their money is going and how much they have in the bank at a given moment. This can result in a financial crisis if hard economic times catch you by surprise. Managing your money and being responsible enough to have a budget is a vital part of being an adult and being prepared for the future. You will be able to set financial goals and reach them if you practice wise debt management.

Reducing Stress

If you manage your money wisely, you can avoid having to stand in a supermarket checkout line, wondering if you have enough money to cover the purchases. Having many credit cards or other types of loans can escalate rapidly into a situation where you cannot even afford to pay the minimum payments on your bills each month. The stress, left unchecked, can become so intense it affects your health.

Budget Awareness

Creating a budget and giving every dollar a place to go is one of the most efficient ways to manage your money. Writing up a budget for you and your family to follow is very simple and only requires a sheet of paper and a pencil. Document the money coming in each month and all the regular bills that you have to pay. Designate a certain amount that each person can use as blow money on "wants." Make sure each person is aware there is never going to be a time when you will allow them to borrow blow money from next month's budget. It is vital to designate a portion of your income to a savings account and emergency fund. You should build up an emergency fund of at least $1,000, according to financial adviser Dave Ramsey's website. An emergency fund will keep you from having to use credit cards when caught in a bind. After you have your emergency fund built up, you should start a savings account that you build each week for your future goals.

Invisible Savings

Managing your debt and controlling your credit cards will save you money in the long run. If you have an emergency fund for true emergencies, and then steadily build a savings account each week, there will never be a need to use credit cards for emergency purchases. Once this is the case, you will be saving money that you were not even aware of, by not having to pay the high interest rates or late fees on your bills. Retailers that promise to give you a certain percentage off if you use your credit card are not wise purchases. Typically, most people will not pay the total amount at the end of the month; they will make minimum payments, thus increasing the actual cost of the item. Retailers are quite aware of this trend, thus the reason for offering advantages and discounts only if you purchase the item with a credit card.