The Ins and Outs of Managing Debt (2024)

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Too many Americans are in debt.

If you’re wondering it’s 80%. 8 out of 10 American’s are in debt with the average household’s credit card debtwith a balance of $15,654. Households with any kind of debt owe $131,431 (including mortgages), on average.

Most end up in debt without thinking about what they are doing. Theyare on autopilot – spending recklessly or endlessly trying to keep up with the Joneses. In the end, they end up with more debt than they are comfortable with. They have pushed past their comfort zone and headed into dangerous territory.

Does this sound like you?

If so, there is something you can do about it.

In my series How To Love Your Money, we’re exploring all money options. All the things you need to do to be well-informed and take really good care of your money.

We’ve already covered, Saving Smart, Developing A Spending Plan, Managing Your Debit Cards and Using Pre-Paid Cards. Today we’re going to explore managing debt.

Table of Contents

THE INS AND OUTS OF MANAGING DEBT

When you get on the path of becoming debt free, it requires a lot of work and one of the things you must learn to do is manage your debt until the day comes where you’re debt has been eliminated.

The first thing you want to understand is what is your personal debt comfort zone.

It used to be said that student loan debt and a mortgage were acceptable forms of debt. Just ask the millions of young adults carrying around thousands of dollars of student loan debt how acceptable it is today, and you might get a different response.

HERE’S WHAT YOU NEED TO KNOW ABOUT MANAGING DEBT

ADMIT THE PROBLEM

If you’re deep in debt, the first step is to admit you’ve got a debt problem. It’s an important first step in tackling the problem. Here are some warning signs you’re in financial trouble:

Next month’s bills are here before you’ve had a chance to pay last month’s
You’re frustrated by the amount you owe because it’s more than you thought it was
You’re no stranger to past due/shut-off notices
You avoid opening bills and letters and hate to answer the phone
You don’t know how much money you have in your account
You don’t track your spending

WRITE IT DOWN

Do you know how much debt you have? Most people don’t. You need to make a list of everything you owe. Include it all whether it be the mortgage, credit card, student loan or cable bill. Include the following information:

The lender name
The amount you owe
The term of the loan
The interest rate and fees

Then total them up. The numbers will probably make you worry, but you’ve already made a positive step. You’re no longer in the dark about what you owe and to whom.

SET A GOAL

Reducing debt is like losing weight. You’re not going to lose 50 pounds in a month. You need a realistic goal in a reasonable time frame. The average person takes four to five years to become debt free. Aiming for three years isn’t too long or short of a time frame. The idea is to set the goal now.

CUT SPENDING

Unless you win the lottery or decide to take another job, the only way to save money is to stop spending it. Cutting spending is the fastest way to reduce the debt load. It’s literally like taking a surgical stab at your finances.

HEAL YOUR RELATIONSHIP WITH MONEY

Once you head down the path to paying off your debt, you’re free to start looking at all the ways you used money in an unhealthy way. You can evaluate what emotions and feelings triggered your spending. It will help you to ensure you don’t get into debt again in the future.

Without doing this step you run the risk (and a high risk at that) of getting into debt again.

Until we have the clarity to understand why we used money in a way that got us into trouble, it’s really easy to find ourselves back where we started and in debt again.

How many times have you paid off debt just to find yourself in debt again?

PROMISE NOT TO SPEND

Put your credit cards away or better yet, cut them up! Adding to your debt load will keep you in the cycle of debt. Your three-year goal will be meaningless. If you buy a new camera and put it on a credit card, and take three years to pay if off, the money you “saved” won’t matter. When you feel inclined to buy, just walk out of the store or get up from the computer when the purchase doesn’t fit your budget. Make a promise to yourself you’ll stop spending money.

BRING IN MORE MONEY

If you can reduce spending, you can also bring in more money. Think about creative ways to retain your income — consider a part-time job doing something you’d enjoy. Or think about making additional money out of a hobby — market craft talents, cooking skills or home-improvement abilities.

GET HELP

If you’re in over your head and having a hard time making changes, get help. The National Foundation for Credit Counseling
(www.nfcc.org) offers information on financial and consumer topics. Their member agencies can help with:

Reviewing income
Setting up a realistic personal budget
Negotiating with creditors to arrange reduced payments on bills
Planning for future expenses

You can learn to manage debt successfully. I did it and I am confident, given the right tools, you can too.

I’m always here to help. If you have questions about your personal debt situation, you can contact me directly at maureen@adebtfreestressfreelife.com.

I answer all debt related emails that come to me.

Check out the entire Love Your Money Series

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