Customized Debt Management Plan

The phrase "debt management" has different meanings for everyone, but it is necessary when you either have a small or fixed income or are trying to get out of debt. To formulate your customized debt-management program, you need to understand basic money-management ideas and then tailor those rules and ideas to your particular situation.

Credit Cards

Credit cards are the primary reason that many people get into and stay in debt. You will need to adopt a different attitude toward your credit cards. Some people may need to eliminate them from their lives forever. Others may simply need to stop using their credit cards until they are paid off and then only use them as a replacement for cash and pay off the entire bill at the end of each cycle. Get familiar with the terms of all your credit cards, and know their limits, fees, interest rates and due dates.

Paying Bills

The best strategy for paying off credit cards and other interest-accruing bills is to pay as much as you can toward the balances on the cards and bills with higher interest rates first without skipping payments on your other bills.

Elimination

You must eliminate as many expenses as possible, which means you will have to do without some things until you get rid of your debt. Determine which expenses you know you can live without, and cancel those services. Pare down or eliminate every expense you have unless it is for food, bills you already owe, housing, clothing or other basic essentials. Morning coffee from a drive-through and 300 digital-cable channels are not necessities.

Budget

Develop a realistic budget that you can live with. Add up all your income sources. Write down all your possible expenses, including seasonal expenses. Figure out how much you must pay out each month and how much you take in each month. You must balance your budget, or you will get into debt again. Once you are out of debt, you should continue to live on a budget.

Customize

Customize the previous rules to fit your situation. If you are a single mom, you may need to eliminate some of your entertainment budget and spend more time with your kids at free activities, such as story time at the library. If you are working with a large family budget, making a choice as simple as eliminating restaurant meals may seriously cut into your debt. Consult each member of your family to help figure out exactly where your debt issues are coming from and what each person is willing to do to help reduce the debt.