Help With Debt Management & Reduction

Anytime you receive goods or services today in exchange for a future payment promise, you incur debt. Although some amount of debt is largely unavoidable, too much debt can significantly affect your present-day financial life as well as limit future opportunities. Fortunately, it is never too late to begin practicing the art of debt management and reduction. While success ultimately depends on your level of commitment, help is available from a variety of sources.

Education

Successful debt management requires an understanding of personal finance. You need to learn about debt, budgeting, the importance of saving and, most importantly, the steps you can take to achieve your financial goals. Learn about money by taking a class at your local community college, reading books or by visiting online sites such as MyMoney.gov, MappingYourFuture.org and HandsOnBanking.org that offer free instruction on a variety of personal finance topics.

Assess Your Situation

In order to successfully manage and work toward reducing debt, you must be fully aware of your situation. Create a list on paper or as an alternative, consider using free personal finance software you can access at sites such as MySpendingPlan.com, Mint.com or MoneyStrands.com. Using whichever method you choose, create a list of all monthly expenses and creditors, the type of debt, total balance and monthly payment amounts and if applicable, the interest rate. Compare this list to your monthly income to see a total picture.

Take Action

Reducing your debt load will not happen without taking positive action. Create a budget you can live with but that reduces unnecessary expenses and then contact all of your creditors, whether or not you are in default, and attempt to work out repayment terms you can follow. If the debt involves a student loan or a type of secure credit such as an auto loan or mortgage, see if you can negotiate a short-term reduction or suspension of payments.

Outside Assistance

Outside help is available in the form of credit counseling and debt management plans. Credit counseling is a good idea if you need additional help assessing your situation, getting and staying organized or creating a plan for reducing debt. In most cases, when you work with a credit counselor, you are responsible for carrying out action steps such as setting financial goals, creating a realistic budget and contacting creditors to work out repayment terms. However, if your counselor feels your situation is serious or creditors appear unwilling to with you, she may recommend that you enroll in a debt management program. In a program such as this, a debt management specialist works out repayment terms and sends monthly payments to creditors on your behalf with funds you provide each month.

Considerations

If you decide to participate in credit counseling, choose your counselor with care. Be wary of any that charge upfront or monthly fees or that encourage you to enroll in a debt management program before assessing your situation.