How To Manage Debt
Despite all of the debt that many Brits are startled with, the truth is that most don’t know how to manage debt. Sure, they may make their monthly payments on time, but simply keeping up with payments is not the same as managing debt in the most responsible fashion. When you manage debt responsibly, you work toward getting out of debt or actually making money with the debt. Most Brits, unfortunately, only find themselves digging themselves into more debt rather than the other way around.
The best way to manage debt is to make wise purchases that will pay off in the future. Purchasing real estate, for example, is a form of debt that will actually help you to earn money down the road. In a sense, real estate is a savings plan that you are forced into – once you sign that mortgage, you are obligated to pay back a certain amount each month. Once that amount is paid off and the value of the real estate has gone up, you can sell it for a nice profit.
Of course, you may not be in the financial situation where purchasing real estate is an option. Rather, you may be bogged down by debt and you are simply looking for an out. If this sounds like you, the first step you need to take in managing your debt is to stop creating new debt. Put simply, if you can’t afford to pay cash for it, don’t by it unless it is a necessity. Remember, if you own money to a credit card, every dollar you spend is essentially borrowed money until that debt is repaid.
When you do have to make purchases, shop wisely. Remember, used goods are far cheaper than new goods. This is particularly true of cars. When it comes time to purchase a new vehicle, shop for a used one rather than a new one.
In order to start paying off that credit card debt, set aside a certain amount of money each month to send to the card. The minimum payment you set for yourself should be more than the minimum payment established by the card, as their minimum payment is usually nothing more than enough to cover the finance charges. As the balance on your card goes down, the minimum payment you send each month will actually begin to have a larger impact on your overall balance because the finance charges will also decrease.
If at all possible, have a certain percentage of your paycheck automatically removed to go toward paying your debts. This way, you will miss the money even less. Then, whenever you have extra money that you can spare, send that to help get you even further ahead at paying off your debt.
Once you do get yourself out of debt, get a rewards credit card and pay it off completely at the end of each billing cycle. This way, you won’t pay any finance charges and the credit card company will actually pay you to use its card.