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3 Debt Management Tips To Keep You Out Of Trouble

Debt management is all about you learning to control the amount of debt that you are responsible for at any one point in time. The following are key debt management tips that budget savvy consumers typically follow:

1) Keep Track of all of your debts – in these days of computers, this should be a snap. If you’re reading this, odds are that you have a computer. According to the Census, the vast majority of households, about 70 million, have at least one personal computer. If you have a computer, you can easily keep track of your debts by using the spreadsheet that comes with nearly every personal computer sold. But even if you don’t have a computer, and have to keep track of your debts by hand, you have to do it if you want to be proficient in managing your debt.

2) ALWAYS pay more than the minimum on your credit card balances – the credit card companies are not your friend. They are not loaning you money to help you over rough spots. They are in the business of earning money primarily on two things – the interest that you pay and the penalties that you pay.  If you are in the habit of only paying the minimum on your cards, you could be years in paying them off. One of the best debt management tips is to treat your credit card as cash and only use it when you are sure you can pay off the balance at the end of the month.

3) Keep track of your debt/income ratio – millions of consumers get into debt problems because they never really learned how to handle money and never really know at any moment in time just how much they owe. By computing your debt to income ratio on a monthly basis, you will avoid being shocked by not being able to pay your bills.

Income does not mean net assets. It means the amount of money you have coming in to you on a monthly basis from salary, investments, or other means. And debt does not mean things like rent, telephone, and utility bills. These are expenses – unless you fall behind in your payments at which point they become debts. Debts are things like your credit card bill and loans of any sort.

If your debt to income ration is 20% or under, you’re in good financial shape. The closer it gets to 40%, however, the more you are entering into the danger zone. You compute this ratio by dividing your monthly debt by your monthly take home income and multiplying it by 100. Make it a point to check it on a monthly basis. If you ever find yourself approaching 40%, it’s time to take serious stock of your financial situation before it gets worse.

Debt is not evil. In fact it’s often useful and no modern economy could run without it. The key is knowing how to handle debt and prevent it from overwhelming you and your family. Hopefully these debt management tips have helped.

You can find many more debt management tips and debt elimination help in other articles and resources on this website.

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