Short-term debt is any obligation that is due in the near future, usually one year or less. A large amount of short-term debt can be crippling to an individual or business. Without proper handling, current debts can go past due and fees and penalties will start accumulating. Remain on top of your short-term debt to avoid financial hardship.
Budget
Short-term debt will have an immediate impact on an individual's finances. To manage short-term debt properly, a borrower must be ready to incorporate the obligation into his budget. If he has an excessive amount of short-term debt, he must go back to the drawing board and reconfigure his financial plan to accommodate the repayment. He should make reasonable sacrifices in any permissible areas. Once the short-term debt has been satisfied, he can adjust his budget accordingly.
Don't Fall Behind
When an obligor sees maturity dates rapidly approaching, it can be a nerve-wracking experience. This is especially true because falling behind on short-term debt can start a chain reaction leading to financial hardship. If a borrower is playing catch up on his immediate obligations, he may not have the capital to satisfy long-term debt. This is why proper budgeting is so crucial to managing short-term debt. Once the missed payments begin, fees and penalties will make it hard to catch up.
Pay Extra
Since short-term debt maturity can come up on a person quickly, it behooves him to make extra payments whenever possible. By eliminating short-term debts as rapidly as conceivable, a person can free up cash to allot to other obligations or investments. Not only can he diminish the debt faster, he has the potential to save a lot of money in interest. The less principal he owes, the less interest he is charged.
Don't Repeat Mistakes
If a borrower has found himself in a bad spot due to poor short-term debt management, he should realize his good fortune when he ultimately gets out of it. The most important thing he can take away from his situation is the desire not to repeat his mistake. By making and maintaining a proper budget and staying on top of future short-term debt obligations, he will be on his way to maintaining fiscal health.
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