Archive for 'Debt Management'
Managing Multiple Debts
Posted on 20. Jan, 2009 by admin.
Managing debt for the most part is quite simple. You know how much you owe and you know when and how much you must pay back. In the case of personal loans, it’s very easy as you have a fixed amount you must pay back each month and for the most part, cannot pay any more or any less than this amount. Credit card debt is a little tougher to manage as you have the minimum payment to make and can then, if you so choose, pay back additional funds onto the card to decrease the overall debt. A little tougher, but still relatively straight forward. With this in mind, it’s hard to imagine why people have so many problems with debt management. I guess to explain this, it needs to be broken down into two parts. The first problem people have with debt management is that they cannot afford to pay back the debts each month. In this situation, all you can really do is either extend the term of the loan over a longer period or better still, consolidate the whole lot into one single, long term, low monthly payment that you should have no issue with paying.
The other major debt management issue comes for people who can quite easily afford to make all their monthly payments, but are still losing money by not paying off the right loans and debts at the right time. For example, some people who have multiple debts will try to clear their personal loan at 5% APR BEFORE they attempt to clear their 20% APR credit card. This is obviously the wrong way of going about it. Successful debt management is not just about knowing how much you owe and when to pay it, it’s also about knowing what money is going where and the specifics of each loans. Organise your debt so you know how much money is being paid off towards interest and how much interest you’re paying. Clear the debts with the highest interest first. This might seem obvious, but people opt for clearing lower interest loans first just because the amount owed it lower. This is a huge mistake.
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Monthly Budgeting Is The Key To Debt Management
Posted on 02. Jan, 2009 by admin.
There are tons of articles out there that discuss the successful management of debts, some more detailed than others and some that simply do not tell you specifically what you need to do - just what you shouldn’t. For me, it successful debt management comes down to two words, monthly budgeting. All of our debts, be it credit card, loan or mortgage come out month to month and all of our income that services those debts comes in month to month also, so this is where debt management needs to start. By budgeting each month, specifically knowing which debt payments are coming out and how much income is coming in, we can first see if there is a problem and secondly, we can see if we can spare even more money to use towards our debts.
If there is a problem, your monthly budgeting will reveal it. If the amount of funds you allocate towards your debts from your income is less than or equal to how much you have to pay back each month, the minimum payment, you need to do something about it - either consolidate or extend your loans to allow for lower monthly payments. If you have funds spare each month, then you need to start allocating those funds towards clearing your debts. Especially if the debts are on credit cards as they are notoriously high interest. Always pay off your credit cards first. Loans are structured in a way that your minimum payments pay back the debt itself, credit cards are not. Your minimum payment on your credit card is near enough all interest so if you want to be free of debt, you almost certainly need to be making more than the minimum payment.
If you follow the above and work out what you need to pay and when, you will be able to manage your debts more effectively and realise when there is a problem, if there is one at all.