Control Your Financial Destiny - Smart Debt Management

Both companies and consumers do themselves a big favor by being mindful of their spending habits in every kind of economic environment. Following a budget, being self-disciplined, saving money and committing to an investment plan are all part of a total financial plan. Of course, another essential element is never a popular one, and that is debt management.

It is always a good thing to know where your money is going. It is even more important to stay on track with income and expenses when the economy is in turmoil. Debt management is part of a larger financial plan, and the aim is to discharge the loans and other obligations that make up the liabilities on your balance sheet. Not fun, not sexy - just necessary.

Drop carrying costs

Now, "carrying costs" is not really a tightly defined financial term, but you should understand it as being made up of all the charges, fees and interest costs of your loans. For example, the late charge on your auto loan and the extra "handling charge" on your credit card cash advance represent an additional load you "carry" on certain loans, in addition to the interest rates. You should reduce or eliminate many of these carrying costs with common sense debt management.

The basics are simple. Pay all bills on time, don't max out your cards, don't exceed any credit limits, contest all questionable charges and use your credit sparingly. If you follow these basic rules, you will likely avoid the sort of financial crises that afflict people who do are undisciplined in these areas. Even if you have already been misusing credit, it is never too late to use solid debt management principles and raise yourself out of your financial hole.

The way back

Before you can put your financial house in good order, you must get an accurate accounting of your financial assets and obligations. There's plenty of help to be had, much at low or no cost, if you don't know how to list income and expenses, or assets and liabilities. Credit counseling is available from various non-profit firms across the country, even on the web. You can also get short, easily understood tutorials on budgeting and debt repayment on scores of sites.

You can take solid steps toward both better debt management and debt elimination after you learn how to see the big picture as well as the smaller, just-as-important details of your finances. If you remit an additional $10 on a $25 monthly credit card bill, for example, you can cut the ultimate cost of that revolving loan by a significant amount.

Subtract, don't add

Among the simplest ways to speed up your debt reduction plan is to cease adding new debt. Do not use the credit cards you have except in an emergency, and don't get any new cards or accounts, period. A possible exception would be if you are offered an exceptionally good deal on a zero-interest card, with a credit line sufficient to pay off the balance of a higher-interest card that you already have. Make sure there is a long enough introductory period (at least nine months, if not a year) to pay off the new balance.

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