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Debt.  Most of us have it, and we all have different ways we try to manage it.  Once you’ve accepted the fact that you are in debt and are committed to paying it down, you should develop a strategy that allows you to pay off your debt quickly and efficiently.  Managing your debt, expenses and available cash effectively will help you achieve your goal of being debt-free. 

The first thing anyone should do is go to Quizzle and get your free credit score and check your report. After that, here are three methods of debt management to consider:

1. Consolidate Debt – This method is good for people who have multiple debts that they are trying to manage.  Consolidating many bills into one low monthly payment can help people pay off debt with ease.  One way to achieve this is to do a debt consolidation refinance of your home mortgage.  Rates are at historic lows, refinancing your high interest debt into loan with a low mortgage rate has the potential to save you thousands.  Some people may even qualify for a tax break.  If you choose this method of managing your debt, be sure to consult a tax advisor to find out which deductions apply to you.

 

2. Order debt in order of highest interest to lowest interest – And pay off your high interest debt first.  If you are going to embark on this approach, be sure that you are not neglecting any secured debt.  Secured debt is debt that is guaranteed by an asset, like a mortgage or a car loan.  Defaulting on these types of debt can have an effect on your credit score and/or put you at risk to lose your assets.  Knowing the differences between secured and unsecured debt and how to effectively manage both types can have a positive effect on your credit score and the total debt you carry.

 

3. Order debt by amount – From lowest total amount to highest, and pay off your small debts first.  This is also known as Dave Ramsey’s Debt Snowball Plan and is essentially the opposite of the method above.  According to Ramsey, if you ignore interest rates and focus on completely paying off debt (starting with the smallest debt you carry and working your way up to the highest) you begin to focus your attention on eliminating debt completely, one step at a time.

No matter which method you choose to manage your debt, you should congratulate yourself on taking the first steps toward eliminating all of your extraneous debt.  Be persistent and stick with a strategy that shows progress.  You may be surprised at how quickly you are able to turn around your financial outlook.

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