Debt Management

A credit repair priority!!


Debt management, this is where a bulk of credit repair takes place after the credit report mistakes are cleaned up.

debt management decisions

Unless we were taught from a young age, by wise parents, how to manage our debt, this is where many of our credit problems exist.

Even if we were taught from a young age, unless those principles were added to and expounded on continually it is an area most have a fundamental handling, of but is like organizing your household.


It's a lifelong pursuit that most feel in the chase mode toward.



Think about it, there are experts that tell us what to do financially, but society in general is not geared toward saving.


It heavily steers us toward spending.

Our free time is spent in front of either a T.V. or computer screen, we listen to the radio on the way to work or errands. We are bombarded with enticing commercials geared to get us to SPEND our money.


No wonder many of us have a problem. If you have children, the problem worsens. Those ads target them. They are our weakness in many cases.


Personal finance should be a required subject in high school. Sadly they can barely budget in the traditional subjects. One thing we can be sure of,  that our debt management is in our hands and with knowledge and planning you can reach your goals.


Options and Plans




If you navigated to this page I'll assume debt management is some kind of problem for you in relation to your credit. If it is not a big problem then maybe a list of debt control hints is all you need.


In credit repair one of the things that should be done first in debt management is a comprehensive tracking of income and expenses.

Most people do not use this approach often enough. If things are even slightly out of control this can be a great eye opener.

You are doing this not only for debt management but to eek out whatever extra income is possible to work on bringing down balances on credit cards. Making that total usage of a card under that 30% of credit use that is so important to helping you achieve the higher credit scores needed to get the better rates.

So it all goes hand in hand.

Debt management = higher credit scores = better rates = less money spent on expenses.

More money in your pocket (better yet your savings account)!

Many people have some sort of budget in place but may not have the whole picture of their financial habits.

One good way to do this is for at least two weeks but preferably one month track all expenses.

Whatever way is comfortable for you. If you are on your computer every day and won't forget to use it, a spread sheet would be a good idea.

For others it may be a small note book and yet others a simple lined piece of paper in a common area (refrigerator or desk).

You will want two columns. One for credit card use. The other for cash and check writing.

This will not only give you the big picture but probably ideas for cutting expenses.

Once you have the whole picture in front of you if you didn't have a budget in place that should be your next job.


There are many free online budgeting plans such as Mint.com that can help you with your budgeting and financial planning.


For some that budget was in place but the income stopped coming in. Here is a budgeting income plan for when the income is reduced.


Keeping structured toward spending helps you keep from impulse purchases. If there's an item you want that isn't a great need having a budget in place for those purchases keeps you from overspending in these areas and getting into trouble. Yet allowing some sort of reasonableness by allowing a portion of your budget to be dedicated to these areas.

PUT A SAVINGS PLAN INTO PLACE



If you haven't already heard of the phrase "pay yourself first" WELL you're going to hear it here!! It's actually a phrase first coined for those in business for themselves but it certainly applies here!

money savings plan

One of the most important things you can do in debt management is to learn to save first. Every financial guru out there will tell you an emergency fund is more important than even paying down your debt.

If you lose your job things can go south fast. In this present economy most can certainly see that.

Even if your finances make you think you can't imagine putting anything away, just to get in the habit, put some small amount away every week. There is something in your life you can cut out for a time to allow for this.

By rearranging your life you can find the money. Cutting out the coffee or soda outside of home and making it yourself or buying in bulk and bring your own.



Rent a movie instead of going to the movies. We all spend money on many small in necessities. Looking at your tracking sheet should help you find where to trim.

That emergency fund, previously it was said needed to be 3-6 months of expenses. Now 6 months is the bottom figure.

That means 6 months of your absolute necessities. Rent or mortgage, utilities, loan payments (car), food. Don't forget or think medical insurance isn't on this list. There is the cold reality of Medical Bankruptcy whereas an unforeseen medical expense was the cause of bankruptcy.

The account  for this emergency fund should be easy to access with the best interest bearing rate you can get.

Once you have your emergency funds in place working on your debt or retirement savings or both would be next.



For ideas on budgeting and saving more of your money go to this highly recommended site...

money saving ideas


Managing the debt



If debt is out of control and a problem for you, some hard decisions and actions may have to be put in place.

In order stay on top of debt management and save money, credit cards have to be put in their place. They should only be used for true emergencies

OR OCCASIONALLY

used to fund a large purchase on sale at a good price on a card with a good percentage rate.


Never should they be used for everyday purchases unless they are paid in full at the end of the month. This can still pose a dangerous habit. The only suggested time this can be looked at as a good practice is with a card that gives rewards and you are looking to finance something special such as airline tickets.

Learning to live on a cash basis lifestyle with everyday purchases is a much more structured and disciplined way to handle finances.


If you are making purchases and not able to pay the card off in one to four months (Preferably that month) and continuously carry a balance then change is in order.


You do not need balances on your cards to get a credit score. If you need to cut them up or give them to someone else for safe keeping then do so.

Cutting them up does not close the account. That has to be done either by you calling the creditor and asking it to be closed or if for some reason the creditor closes the account.

Usually that is either for inactivity (no balance) and no use, or lack of payment.

In credit repair your debt management is important as your credit score is heavily based on how you handle credit card debt.

Other types of debt are looked at and judged (auto loans, installment loans) but there is usually some sort of collateral that backs that up.

Credit card debt and how you handle it really does show whether you have debt management in control or not.

If you do get in the sticky situation of getting behind on your payments this next page is an important read.


fair debt collection practices act



If debt management is really out of hand a possible stint of extra work to get it in control again may be in order. (If that is a possibility for you though presently many are having a hard time getting or keeping the first job!).

One way some get a handle on many credit cards is to consolidate. Many times just the simplification of taking many balances and turning them into one easier to manage account is all that is needed. It also adds to your variety of credit use if it is consolidated by an installment loan.



Depending on how much you owe and whether your credit score and income level will capture a decent rate to allow you to consolidate on your own is one option to look at.

Some of you may have considered the help of a Christian credit repair service when having trouble managing your debt.
Here is an article written by a contributor to this site that leads to more information on that subject of Christian credit repair

Another is a strict budget, 0 credit card use and a frugal life style to free up cash and make out a repayment plan of your own.

Using the debt stacking method or as some may call it the snow ball effect, which is the same method many debt management companies use in eliminating credit card debt




Getting professional help



If you really don't have the discipline or the financial resources to accomplish debt management control on your own then the services of a debt consolidation or credit counselor are another consideration.


If your income has fallen or become unstable you may fit into a program that already has reduced rates worked into it.

There are companies that call themselves a debt consolidation company when in fact they are a debt settlement company and others are debt management companies.

So you need to determine which you are working with.



Debt management companies will

negotiate better terms for you,
get fees waived and handle how each creditor on the account is paid.

Generally speaking if you have debt at high interest rates and you are already having problems paying on time a debt management plan will work for you.


On the other hand Debt settlement companies arranges for you to pay off your balances at most times a significantly reduced rate but have negative credit impact problems.



Then if you are in most dire of situations there is bankruptcy. Consolidation companies will tell you that this should be avoided at all costs.


Bankruptcy does impact your credit but so does debt settlement.



It really depends on ones situation and what your financial goals are in the end.


If you are young and have the thought of a mortgage or new (or fairly new) car loan in mind then the safer road of a debt management plan may be your best bet.


If you already have the house, the car, insurance rates you need in place and they will outlast the 7-10 year hit of settlement or bankruptcy and the savings and debt freedom are what counts then these are indeed valid options for you.


The important thing to remember is that any negative activity on your report..... that time and additional good credit are the best solution.



The longer a distance you have between the negative event and the time when you need credit again the better. In that time you will need to add as much good credit as possible.



THINK CREDIT REPAIR STRATEGY. Even though bad credit can stay on your report for a length of time it's that last two years that are the determining factor of new credit.


If you are to go through bankruptcy your debt will be gone (in a chapter 7 instantly a chapter 13 in a 3-5 year period). Living a pay cash only lifestyle can be a good thing even liberating.


Even in bankruptcy, houses can be saved, cars kept, timeshare property can be kept. Ira's, 401K's or any retirement plans are not touched.


There are options. All should be considered and researched thoroughly.



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