Debt Management Benefits

Managing your debts effectively requires a skillful synthesis of different spending habits and a different way of thinking about money. Taking harsh measures against yourself and imposing strict self-austerity measures might help your finances, but it won't add much joy to your life. Developing more productive ways of viewing your financial life, as well as discovering cheaper ways to entertain yourself, are more effective ways of managing debt than policing yourself mercilessly.

Debt Management and Debt Cancellation

Debt management differs from getting rid of a debt entirely. Although the latter would obviously be the preferable scenario, if you were able to do that you probable wouldn't have a debt to begin with. Working out methods of managing your debts in a sensible and productive manner usually makes more sense than going overboard trying to eliminate them immediately. Managing debt entails keeping up with the monthly payments, avoiding penalties and avoiding new debts that could crop up when you spend too much cash attempting to get rid of the old one.

Spending Habits

Changing excessive spending habits will help you manage your debt in two ways. Lower levels of spending will release more of your cash, cash that should be spent paying off some of your debt. Also, frugal spending will assist you in avoiding the build up of new levels of debt. Exploring a different way of relating to money, one that recognizes need and not desire, will help you to maintain a new financial life. Investigate the pleasures of cheap leisure time, like reading a book or walking with friends, and you will find that your debt is more easily managed every day.

Kinds of Debt

A key to managing your debt effectively is to make the distinction between useful, necessary debt and destructive, avoidable debt. The first occurs when you acquire things that you need that are too expensive to buy with cash, a house being the most common example of this. The second occurs when you indulge in excessive impulse spending for expensive things that aren't really necessary for your survival or even for your happiness. A mortgage that is being maintained at a reasonable rate of interest is a very manageable debt, while monthly credit card payments in the hundreds of dollars for indulgences will damage your financial health.

Wants vs. Needs

Some people go into debt because they truly don't have enough money to meet their needs. This kind of poverty is a serious problem, as it is difficult to solve through a modification of debt management techniques. If your debt is caused not by this level of poverty but by unsustainable spending habits, you are in a better position to solve the problem because you can improve your situation through force of will. Make a list of all your spending over the course of several months, then sit down and analyze how much of it was for needs and how much for wants. Cut out the percentage of the "wants" that you feel comfortable giving up, and this much more money will be in your bank account at the end of every month.