Planning to Manage Debt
If you've determined that you are in debt, you've probably already starting trying to figure out how to get out of it. If you haven't started, now's the time. One of the worst things about debt is that it will not go away on its own. In fact, if left to its own devices, debt will get worse. It will continue to grow at an alarming rate, making it increasingly difficult to get out of. The second you figure out you're in debt is when you should start putting together a plan to get out of it.
Tally up Your Debt
Before you can make a complete plan for getting out of debt, you need to know how much debt you truly have. The best way to find out who you owe and how much you owe them is to look at a copy of your credit report. New laws make it possible for you to obtain a free copy of your credit report each year from each of the three credit bureaus. You can get these free copies by visiting www.annualcreditreport.com.
With your credit report in hand, write down the name of each of your creditors and the total amount you owe them.
Since not all institutions report to the credit bureaus, there's a chance that your credit report doesn't contain all your creditors and lenders. Use recent bills and statements to list any debts that weren't included in your credit report.
How Much Can You Afford To Pay?
The next step is to figure out how much you can put towards your debt each month. To do this, you need to calculate the amount of money you have left after all the bills have been paid. By subtracting total expenses from total income, you can determine the amount you can pay on your debt.
Making the Plan
Now you have the key elements that go into making a debt management plan - total debt and total money available to pay debt - you can figure out the best way to pay your debt.
If you are behind on any accounts, get them caught up. You can try working with your creditors to get the past due amount lowered.
Pay off the highest-interest debts first. Use everything you have allocated for paying off debts to pay off the debts with the highest interest.
Pay off lowest-interest debts next. Once you've eliminated your high-interest debt, you can then tackle the low-debt.
Include details on how much will be paid to each creditor and lender each month. This way you'll know about when each of your debts should be paid off.
