Debt Management

1. Begin Budgeting
Many people spend what they earned. Some have little idea exactly how much money they are spending and what they are spending it on. Budgeting is an excellent and essential tool to understand where your money is going and to help your prioritise where your money should go. Budgeting may assist you in better managing your debt.

2. Pay bills immediately
This is part of your budgeting. Many people pay their bills on the due date while some people pay them late. Late payments of bills may affect your credit rating or could increase the amount you have to pay. Many financial institutions charge late fee. Deferring payment of bills is a bad and costly habit. If you pay your outstanding bills immediately then it will help you manage your money better. You will begin to understand exactly how much disposable income you have.

3. Recognise your debt as a total sum
Many people view debt in pieces and not a whole. Some people think they have low debt levels as they have a small personal loan and a couple of credit cards. If you have a personal loan for $4,000, one credit card with a $4,000 balance and another credit card with a $3,000 balance then you have $11,000 of outstanding debt that needs to be serviced and ultimately paid off. Donít think because your credit card levels are reasonably low you can get another card and begin using it especially if you are beginning to worry about your credit card bills when they come in. Have a look at the big picture and begin managing your debt effectively.

4. Eliminate your higher interest debt
You may use several debt vehicles like credit cards, personal loans and overdrafts. Depending on the type of debt, the levels of interest you have to pay varies. Manage your debt by eliminating your higher interest debt. This does not mean getting rid of your credit cards. This means shopping around for better products in the market. Donít settle for a credit card charging 25% interest when you can have a credit card charging 10% interest. You can also sometimes replace the debts which charge higher interest with a loan which is at a lower interest rate (such as replacing a credit card with a personal loan).

5. Set up automatic debits from your accounts for over the minimum payments
Minimum payments donít help you manage debt. Paying above the minimum payment will help you to reduce debt faster, pay less interest and more easily manage your finances. Set up a direct debit facility so the amount leaves your bank account automatically.

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