Personal Debt Management

For effective debt management, first you need to split your expenses into fixed costs and variable costs because you can only control (decrease/increase/cut off) these. Rents, fees, insurance premiums etc. will have to be paid the same way. After that you should prioritize your expenses. Your variable costs could be including a $4 magazine that you buy daily on your way to work. Do you honestly need to spend $80 on magazines every month when the same material is available on the T.V and the internet? Debt repayment can be a painful process when you have to cut down on expenses like these but it is worth the pain.

Another method to manage debt is to consolidate your debts. This means combine all debts and have the interest rate revised by your creditor. For example if you are paying 2% on personal loans category A and 6% on personal loans category B, both taken from the; negotiate with your creditor to combine both loans for an interest rate of 6.5 or 7% in return for a shorter payback period. The 0.5% saving could be worthwhile.

Avoid debt managers if you can because the upfront fees that they charge would only increase the costs you are already trying to cut down.

For paying off debt in an effective manner, you must have a list of all debts that you owe. Begin by paying off the debt with the highest interest rate. If you get rid of an 8.5% loan worth $100,000, you would be saving $8,500 per annum!