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3 keys to debt management

Unfortunately, one of the lessons they do not teach in school is how to effectively manage debt. For most people, it is something they figure as they step into adulthood and open their first credit card account. While it often starts small, with that first low-limit card, as we get older, we tend to enter into more debt.

For instance, your first car loan was probably a major jump in your overall debt. Then came the home loan and perhaps another car and various credit cards. In fact, most Americans live their lives paying on one debt or another. For some people, the debt might remain at a manageable level compared to income, but for many others, this is not the case. In an economy full of downsizing and layoffs, it is easy to find yourself in a position where you can no longer manage your debt.

One of the major keys to staying in control of your debt is organization. Whether you only have a little debt or a lot, a simple misstep and pure bad luck can cause major problems. Here are a few tips to help you manage your debt.

Know your creditors

Not only should you keep up with whom you owe, but you also need to keep track of what you owe. Start by making a list of all of your debts and be sure to include details like the creditor name, total debt, required monthly payments and their due dates. If you are unsure of whom and what you owe, you can pull a copy of your credit report. Once you have a list, keep up with it regularly, especially as you make payments or if you miss a payment.

Pay on time

Mounting late fees will only add to your debt since it will increase your interest rate and finance charges. Make every effort to make your payments on time to avoid these extra charges. To help you keep up with the due dates, set an alert on your phone or computer, or mark your calendar. If you do end up missing a due date, do not wait until the next payment deadline to send the money. Instead, make that payment as soon as possible to avoid a slip in your credit score.

Prioritize the debt

Take the time to prioritize your debt while formulating your payment plan. For instance, you should start with credit card debt since it usually carries a high interest rate when compared with other debts like student loans or outstanding medical bills. Once you rank your debt in the order you intend to pay it, start with the creditors that carry the lowest balance.

While the above tips can help you manage your debt, sometimes circumstances do not fully cooperate. For instance, if you lose your job in Lexington, take a substantial pay cut or suffer a medical emergency your insurance will not fully cover, you could find yourself unable to pay on even a little debt. If this happens, then it might be time to consider more drastic measures, such as filing for bankruptcy.

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