debt

3 tips for better debt management

If you use credit for all of your purchases, whether it's a car or groceries, debt management may not be on your radar. Using credit is a lot faster and easier than saving, but it can lead to long-term problems and high interest fees, costing you thousands of extra dollars every year. Consider these three tips for better debt management if you want to get out of debt and into a cash-flow, positive net worth zone.

Written budget

If you don't know where your money is going, you'll never have any. It will run away, hide or completely disappear. A written budget stops your money from getting out of your control. At the beginning of every month, allocate where every penny is going based on your take-home pay, including the money you put away in savings. There shouldn't be any money left after you fill out the entire budget. You can adjust the budget during the month or maintain it weekly, but don't spend any money that's not in the budget. The whole idea of a budget is to live within your means, not based on your credit card limit.

Maximum versus minimum

The key to debt management is to get rid of debt completely, but it's difficult when you are throwing away money on interest. Minimum payments on your credit card(s) won't get you far, and you'll end up spending way more than what your purchases cost to begin with. Using your budget, squeeze out every extra dollar and pay the maximum amount possible toward your credit card payment every month instead of the minimum, even if it's just a few extra dollars than the minimum. It may literally save you thousands of dollars.

Freeze your credit card -- literally

If you love your credit card, it may be hard to part ways at first -- but it's crucial if you want to get your debt under control. The first step is to stop using the credit card, and if it's frozen in a block of ice, you can't do much with it. Take your credit card, put it in a cup of water, and place it in the freezer. You'll have to think pretty hard about using the credit card again, but you'll find comfort in knowing it's there. It may sound like Grandma's remedy, but sometimes simple solutions can tackle big problems.

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