Managing Your debts

With the economy so difficult at the moment there are many more people finding that they are getting in to debt. Knowing how to manage debts can be difficult, especially as it is something that many of us are not taught.

If you have any debts, then you should always be thinking of ways to reduce them. They can drain you of a lot of money and the sooner they are paid off the better. This is where good debt management can be extremely useful.

The first thing that you need to do is to find out exactly how much you owe and who to. Make a list of your debts and then find out how much interest and the fees that you are paying on each one. Look at these charges and work out which one is costing you the most. This is the one that you need to concentrate paying off first. Pay the minimum you have to pay off all of them each month, but pay of extra from the most expensive one. Then once this is paid off, work on the next most expensive and so on, until they are all paid off.

Managing Your debts

Of course, it is not as simple as it sounds because you need to have spare money to be able to pay it off. It is a good idea to use savings to do this, because the debts will cost you more money than you will gain in savings. It is also worth looking at your monthly expenditure and working out how much you can cut down what you spend each month. Anything unnecessary can be cut out and you can try to lower your regular bills as well.

It is also a good idea to see whether you can earn more as well, by doing extra hours at work, changing jobs to a better paid one, getting a second job or selling things to make some money.

Some people find that they owe so much that they cannot afford to even make the minimum payments each month. If this is the case with you and you have done everything you can to reduce what you spend and increase what you earn then debt consolidation could be worthwhile. This will combine all debts and allow you to pay them off over a longer term in smaller amounts. It can be dearer but is more manageable, but you need to make sure you do not get tempted to build up more debt until you have paid off what you owe.