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The Best Debt Management Tips of 2017

Being deeply in debt can skew your entire financial life. If your problem with debt becomes serious enough, it will affect your credit score. In turn, this can mean higher interest rates, higher insurance premiums, and even problems renting a house or apartment. What debt amounts to is borrowing from your future self, and your future self could end up being very disgusted with you due to all that debt you now have to pay off.

Ignoring your debts won’t make them go away any more than ignoring a bad tooth will make it go away. You need to take steps now to do a better job of managing your debts, and here are eight tips that could help.

1. Pay down your debts soonerAdult Woman

The easiest way to get out of debt is to pay down your debts quicker. Are you making just the minimum payments on your credit card debts or other revolving debts? Try doubling down on as many of them as you can, or at least paying significantly more than the minimum. In addition, if you pay half your monthly bill every two weeks, you’ll be making one extra payment over a year, which will help you pay off that debt sooner.

2. Set up automatic payments

You should be able to set up automatic bill pay through your bank. If not, you will need to go to your individual lenders, and arrange automatic payments through them. Automatic bill paying accomplishes two things. First, it eliminates the possibility of missing a payment. And second, it relieves you of the burden of having to remember when your payments are due.

3. Make a budget

Trying to manage your finances without a budget is like trying to assemble an IKEA desk without the instructions. You may get the job done but only by luck. If you truly want to do a better job of managing your finances, you need to create a budget or at least a spending plan. One of the simplest ways to budget is to divide your net income into three categories. The first should be your essential expenses (think utilities, rent, or mortgage payment, etc.). This should be 40% of your net income. The next 30% should be your savings. The final 30% is for your discretionary spending or the fun things in life.

4. Pay off the debt with the lowest balance

This is called the snowball method. The financial guru Dave Ramsey introduced it.. The psychology behind this is that you should be able to pay off the debt with the lowest balance very quickly. This will give you momentum (as well as more money) to pay off the debt with the second lowest balance, and so on. It’s like how a snowball rolling downhill gathers momentum.

5. Understand your limits

Maxing out your credit limits can do serious damage to your credit score. Keep the balances on your credit cards as low as possible. If you can keep their total below 30% of the total amount of credit you have available, your credit score will improve. And, of course, always make your payments on time.

6. Check your credit reports

You can get your credit reports free once a year from the credit reporting bureaus – TransUnion, Experian, and Equifax. Or you could get all three simultaneously on the site www.annualcreditreport.com. The reason to keep an eye on your credit reports is to spot errors that could be dragging down your credit score. Many people choose to get a free credit report every four months. This is a way to kind of monitor credit year-round, without having to pay a credit monitoring service.

7. Create an emergency fund

You can never know when you’ll run into a financial emergency, but you can bet you’ll have one. You could lose your job, your automobile could require an expensive repair, or you could suffer a serious illness. The only way to buffer yourself against one of these emergencies is to have an emergency fund. While many experts feel your fund should be the equivalent of six months’ of your living expenses, most people find this undoable. If you fall into this category, try for at least three months’ worth.

8. Stop using your credit cards

Unless you’re paying off your balances at the end of every month, using your credit cards means piling on more debt. So, stop using them. Try to pay cash for all your purchases. If you don’t have enough cash to pay for something, don’t buy it. We understand that takes a serious amount of self-control, but it’s the only way to keep from adding on debt. When you stop using your credit cards be sure continue making your monthly payments, This will improve your credit utilization rate, and will help your credit score.

In summary

Here were eight tips that could help you better manage your debts. If you don’t feel you can implement all of them this month, at least pick a couple and try to use them. Doing something is better than doing nothing – especially when it comes to your debts.

5 Of the Best Debt Management Tips of All

If you’re trying to do a better job of managing your debt, you may have read a lot of good tips for doing this. But what are the best debt management tips of all? Certified credit counselors associated with the NFCC (National Foundation for Credit Counseling) were recently asked what their best debt management tips would be and here are their top five.Erasing Debt

Make debt management eaiser by consolidating your debts

If were to consolidate your loans and multiple credit card debts, you should find it much easier to manage them. If you’re typical and got a bachelor’s degree in 201 you probably owe $27,000 in student debt spread out over as many as 12 loans. You could simplify things considerably by getting a Federal Direct Consolidation Loan. You would then have a new interest rate based on a weighted average of your student loan interest rates, which cannot exceed 8.25% as well as a new monthly payment. Equally important, you will have multiple repayment options, including several that would be based on your income. And the minimum monthly payment on that new consolidation loan will likely be lower then the total of the payments you’ve now making on your student loans.

The second way to consolidate is if you have high interest credit card debt. If this is the case, you might transfer those balances to a new card with a much lower interest rate. If you could qualify, you might be able to transfer your balances to one of those 0% interest balance transfer cards, where you would have anywhere from six to 22 months’ interest free.

Negotiate after budgeting

If you don’t already have a budget you will need to develop one. Once you’ve done this you can begin contacting your credit card companies to negotiate lower interest rates. For example, if you have any credit card debt at 16% you might be able to negotiate that down to 7%. A lower interest rate like this would mean a substantially lower monthly payment that should be easier for you to make. It’s not too late to contact your credit card companies to ask for rate reductions even if you’re several months behind on your payments. However, you’ll have more success in negotiating your interest rates if you’re current with your payments.

Establish priorities

If you find you’re unable to pay all your bills every month you need to prioritize and focus on staying current with your secured debts such as your mortgage and automobile loan. Also, give a high priority to debts like utilities that are true necessities, and debts like student loan debts that can’t be discharged – even in a bankruptcy.

There are basically two ways to prioritize unsecured debts such as credit card debts. The first is to snowball them, which means ordering them with the debt that has the smallest balance at the top down to the one with the largest balance. You would then focus all your efforts on paying off that debt with the smallest balance. You should be able to do this fairly quickly and this will free up money to begin paying down the debt with the second smallest balance and so forth. The second option is called the debt avalanche. This is where you order your debts from the one with the highest interest rate down the one with the lowest and then put all your efforts into paying off that first debt. Some experts believe this is the better of the two options as it will save you the most money.

Use a credit counseling agency

If you feel totally overwhelmed by your debts, then using a credit counseling agency could be a very good option. The agency will serve as a consolidator because you will make just one payment a month to it and it will then distribute the money to your creditors. If you choose an agency that is affiliated with the National Foundation for Credit Counseling, you will be charged an initial set up fee of just $30 and a monthly maintenance fee of probably $20. Before choosing a credit counseling agency make sure to check with your local Better Business Bureau and stay away from any for-profit debt settlement companies that say they can settle your debts without counseling or a debt management plan (DMP).

Consider the “nuclear option”

Filing for a chapter 7 bankruptcy is often called the “nuclear option” because of the damage it will do to your credit score and credit history. However, it can be an option for some people.

A chapter 7 bankruptcy is often called a liquidation bankruptcy because it’s goal is to sell of your assets to repay your lenders. It will eliminate your liability for repaying certain debts, including credit card debts, though there are some debts such as student loan debts that not even bankruptcy can discharge.

To get a chapter 7 bankruptcy your income will need to be below a certain dollar amount. And you may not have to actually liquidate any of your assets because both state and federal bankruptcy laws have exemptions. For example, it’s likely you will be able to keep your automobile and the equity in your home. The state of Nevada allows couples to keep up to $550,000 of equity in their primary homes. Florida actually exempts all primary residences. Regardless of where you live you will be allowed to keep all or most of your personal property. Also exempt are Social Security, retirement account assets and pension benefits

The Best Debt Management Tips Of All

There are tons of debt management tips and most of them represent good advice. For example, one of the debt management tips you’ll see over and over is the importance of budgeting. And there is no question that developing a budget can be a good step towards better debt management. But let’s face it. Budgeting isn’t for everyone. There is a whole platoon of budgeting apps and software programs that make it pretty simple but they all demand a certain amount of self-discipline.

As an example of this, the very popular Mint.com promises to track your spending for you but you must link it to your checking account and all of your credit cards. If you pay cash for things you must remember to write it all down and then add the information to your account. If you add a new credit card and forget to link it to Mint you won’t be tracking all of your spending. Mint will also organize your spending in the categories but it can’t keep you from overspending.

Best debt management tip #1

One of the best debt management tips is to put away your credit cards and pay cash for everything. The reason for this is a bit of psychology. When you use cash for all of your discretionary spending you’ll end up spending less, as it’s just much harder to pull money out of your wallet to pay for something than to swipe that little piece of plastic. And, of course, it totally eliminates the possibility of adding on debt.

What you will need to do is make a list of what you typically spend in two weeks. This would include eating out, clothing, transportation, entertainment and anything else that doesn’t require a fixed payment every month. Add up that spending and then next Sunday go to your nearest bank ATM and take out that much money in cash.

What do you do if you run out of cash before your next two-week period? It’s really best to not do this because if you do you’ll either have to quit spending money altogether – which might not be a really bad thing – or you’ll have to get out that little piece of plastic, which would be a really bad thing.

Best debt management tip #2

This may seem elementary but if you pare down your debt payments to just one or two you’ll find it much easier to manage them. There are two ways to consolidate debts that are worth considering. The first is if you have multiple student loan debts to multiple loan servicers you could consolidate them with a Federal Direct Consolidation Loan. The interest rate you will be charged on that loan will be the weighted average of the interest rates on the loans being consolidated, rounded to the nearest higher one-eighth of one percent.

A simpler explanation is that your new interest rate will be higher than the lowest interest rate you’re currently paying but lower than the highest. In addition to getting a lower interest rate – probably – you’ll still be eligible for all the various federal repayment plans including the new REPAYE program or Pay As You Earn Revised.

Consolidate your credit card debts

If you have multiple credit card debts you could consolidate them with a balance transfer. There is now any number of 0% interest balance transfer cards available. If you were able to qualify for one you would then not only have just one payment a month it should be for less than the total of the payments you’re currently making or a definite win-win. The one thing to be careful about these cards is that once your introductory period ends your interest rate could skyrocket to something like 19%. If you’re not sure you’ll be able to completely pay off your balance before your introductory period ends it would be better to transfer those balances to a new card that just has a lower rate.

Best debt management tip #3

If there is some reason why you can’t consolidate your credit card debts at least prioritize your payments. The financial expert Dave Ramsey is big on what he calls the snowball method for paying off debts. This is where you order your debts from the one with the lowest balance down to the one with the biggest. You focus all of your efforts on paying down that first debt with the lowest balance, as it should go quickest. When you have it paid off you will then have extra money to begin paying down the debt with the second lowest balance and so on. Of course, while you’re doing this you need continue making at least the minimum payments on your other debts.

A second way to prioritize is to order your debts from the one with the highest interest rate down to the one with the lowest. There are experts who favor this approach because it will save you the most money – though you won’t get out of debt as quickly as if you were to snowball your debts.

Best debt management tip #4

If you are feeling totally overwhelmed by your debts, go get some help. A credit-counseling agency could help you formulate a plan for getting your debts under control. Your credit counselor will negotiate with your creditors to get your interest rates reduced and have late fees and other penalties waived. The credit-counseling agency will then serve as your consolidator collecting one payment a month from you and then distributing the money to your creditors.