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Debt Management Tips and Advice
The great elephant in the room of American money management is the specter of debt. The average American family is saddle with nearly $10,000 in credit card debt, in addition to mortgages, auto loans and other obligations. What's more, times are hard and getting harder, with economic growth projected to slow significantly or even contract during 2008. Now, more than ever, managing your debt is essential to your economic well being and your personal and family security. If you're drowning in debt, debt management may seem like a luxurious fantasy, but it doesn't have to be. Read on for some valuable advice.
Pull it Together
Are you collecting receipts for every single expenditure? It's time to start. If you're already a receipt saver, then compile a list of your expenditures over the last three months. You can include the basics like rent, taxes and insurance. But what we're really targeting here is the non-essential expenditures. Divide your spending into easily recognizable silos like food, entertainment, transportation, clothing, etc... Then, begin plotting how to excise at least 8-10 percent off each category, across the board. When you think about it, this percentage will be easier to save than you might expect. The money you don't spend will form the foundation of your plan to successfully manage your debt.
Make a List
Now it's time to compile a list of your debt obligations. In a computer program like Microsoft Excel or even on a clean sheet of paper, make a chart of each debt you owe, the amount and the interest rate or annual percentage rate. Now you can target which debt you should try to kill first. You may notice that one particular credit card is killing you for nearly 30 percent interest on a balance of more than $4000. This debt ought to be focused on before your student loans, clocking in at more than $4000, but at an interest rate of only 5%. At those rates, you can afford to pay 5% a lot longer than you realistically keep paying 28 percent interest. Pay the minimum you can on lower interest rate debts, and use the savings from your "pull it together" plan to apply in chunks to your higher interest credit card debt and loans.
Make it Happen
You can't manage your debt overnight. It's a process that requires months of diligence and years of follow-up. However: This process is not brain surgery, and it can easily be accomplished by a borrower that's truly serious about dealing with his or her debt.
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