Anna Fleet

01/12/2008

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Tips for Controlling and Managing Debts

Suggestions for Paying Down your Debts

The first and most obvious tip for trimming down debt is to spend less, and it’s the advice most counselors will start out with. Yet, this simple piece of advice is sometimes just too simple, especially if your income isn’t as high as you’d like and you’re already living on the edge. Many people that live frugally are still nonetheless in debt, and it’s difficult to trim down expenses any further than they already are.

However, it can still be done. The first part of trimming down debt is to manage it and understand it. It’s surprising how many people have no idea how much they spend each month. Instead of just paying bills when they come in, or worse, just letting them pile up and then trying to pay them all at once, create a spreadsheet or a file so that you know exactly what is coming, and when each bill is due.

Many banks offer electronic bill paying at no charge, and this is an excellent tool for keeping track of your bills. You can even set up your account so that certain bills are paid automatically out of your account every month. Allow enough time for the mail to deliver your payments, and pay each one at least a week before the due date. Once you have a handle on how much you’re spending a month on the necessary bills, you’ll have a better idea how much you can spend on the non-necessities. At the end of every month, total up all the bills you have paid, so you understand exactly how much was spent.

You can trim down those utility bills easily with good management of your thermostat and home lighting, and you’ll be surprised at how much you can save—and the savings from your gas and electric bill can be used to pay off your credit cards or other debt. Using screw-in fluorescent bulbs instead of conventional bulbs will keep your light bills down, and installing an electric programmable thermostat can literally save hundreds of dollars during the winter on your heat bill.

Program your thermostat to go down to 60 degrees after you go to bed, back up to 68 when you get up, and then back to 60 after you leave for work in the morning. By programming it to accommodate your schedule, you can remain comfortable, and still save a great deal of money in the process.

Your largest debt is probably your home, and there are even ways to cut down your mortgage payment. Keep a close watch on interest rates. If you have a high interest mortgage, you may be able to refinance at some point if your credit is good enough, get a lower interest rate, and cut a substantial amount out of your monthly payment. You can also take advantage of interest rate differentials by shifting credit card debt.

Use credit cards with high interest only sparingly, and if you can, shift your high interest credit card debt to a second card that has lower interest. Some cards offer an introductory rate of zero percent interest on balance transfers for six months, and this can be a great way to cut down credit card debt. Alternately, if you have a very high amount of credit card debt, you might be able to take out a lower interest rate home equity loan to pay off your credit cards—and then trim down your credit card collection to only one.

Sometimes debt gets out of hand when you come up short, and resort to high-interest credit card cash advances or payday loans. These sorts of advances may help in the short term, but they can be hard to pay back, and you may get stuck in a never-ending cycle. Having a cash fund of a thousand dollars in the bank, which you can draw against when you’re short and then replenish when you’re able, will help you to avoid having to resort to these costly measures. Of course, it’s not always easy to come up with a thousand dollars, but it can be done even if you don’t have much money, just by putting a bit aside every week.

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