Implementing a Good Debt Management Program
One of the most important aspects of managing
personal finances is having a good debt management program in place. The
fact of the matter is that if you are successfully managing your debt
you should have little to no debt to worry about. The unfortunate thing
is millions of Americans do not know how to do this and are experiencing
cash flow problems that are approaching crisis proportions.
The problem many people have when it comes to accumulating debt is
distinguishing between their wants and needs. Needs always come first
because you need those to survive. Things such as shelter, food,
clothing, and reliable transportation are things that just about
everyone needs. The problem many people have is coming to terms with the
fact that even needs can be turned into wants, and this is where they
get in trouble.
As an example think about buying a car. Nearly everyone needs a form of
good reliable transportation, but no one needs a $400 a month car
payment. Wanting to buy a $35,000 car because you think you need one
when you make $40,000 a year makes no sense. This is particularly true
when you consider that a new car loses 60% of it value within four years
of driving it off the dealer's lot. Filling your transportation need
with a good used car that costs five to ten thousand dollars makes much
more sense from a financial perspective.
The point is any good debt management program takes care of the needs of
you and your family first. Money that is left over after all the needs
are met can be put into a savings account or be used to satisfy those
wants that we all have. But those wants need to be paid for with cash.
Creating new debt simply because you want something is one of the
easiest ways to overextend your financial situation.
Managing debt is more than trying to decide between wants and needs; you
will also need to create a game plan to tackle whatever existing debt
you may have. The easiest way to manage this type of debt is to make a
list of all your creditors, the balance currently owed, interest rates,
and interest paid each month. Knowing how much you owe and to who is an
invaluable debt management tool which allows you to build a monthly
budget that is accurate and sustainable.
The next step in managing your debt is coming up with a workable plan
that allows you to pay off your outstanding balances. For many people
handling money is an emotional issue and it needs to be handled in this
fashion. Start with your smallest debt and pay extra on it while paying
the minimums to all your other creditors. The psychological benefit of
doing it this way is you will make quick work of that smallest debt
which will give you the motivation to continue your quest to being debt
free. Once that debt is paid take that payment and roll it into your
next smallest balance and so on up your list.
The goal of any debt management program is to decrease your debt in a
timely manner until you can become debt free and take back control of
how your money works for you, not your creditors. | 
