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Debt Management

If you're trying to become debt-free, you need to have a plan to move forward - and learning debt management is the way to do it. What is debt management? It is a customized system that you create to live within your means and slowly emerge from debt. Because the causes of debt are different for everyone, your management system will also be personalized to your specific needs. This guide will break down how to identify your unique needs and how to create a sensible debt management plan that will carry you into the future. Let's get started!

Debt Management

Can Debt Management Help Me?

This debt management plan is best for those who have "unsecured debt". Unsecured debt includes things like credit card debt, bank overdrafts, and personal loans. If your debt is caused by mortgages or rent, this is considered "secured debt." Secured debts are a little trickier, and you may want to consult a financial advisor instead.

Why Do I Need Debt Management Skills?

It's easy to spiral into debt, but it's a lot more difficult to climb out of it. That's why it's crucial to come up with a strategy to move forward, rather than hoping things will simply get better with time. Not only does extended debt reflect poorly on your credit history, but it can also affect your ability to secure loans and mortgages down the line. Not to mention, interest accumulates and puts you in an even deeper financial hole. The best time to work on your debt is the present!

How Do I Make a DIY Debt Management Plan?

If you are driven to become debt-free, we recommend taking an honest inventory of all of your expenses. Take a look at your debit and credit card statements, and see where money is flowing. Make a list of everything that you spend within a month, like:

  • Mortgage or rent
  • Utilities
  • Groceries
  • Entertainment
  • Clothing

Now, mark down which expenses are essential - like your rent and electricity bill - and which expenses are luxuries that you can live without. It's important to identify your particular spending triggers, whether you love shoe shopping or going out after work. Then, create a sample budget without the expensive extras. How much more can you put into your debts if you skip your daily trip to the coffee shop?

What About Professional Help?

Debt management can be difficult, so there's no shame in asking for help!

  • Credit Counseling: Companies will negotiate with your debt lenders to reduce your monthly payments, but you must pay on time.
  • Debt Consolidation: This strategy consolidates your debt into one fixed-rate loan, but you need to have good credit history to qualify.
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