With over half of the United States population having debt under their name, it’s important to remember basic money management techniques to keep this debt in check. Debt can range from a variety of sources including home and car loans, medical bills, credit cards, education loans, and more! Regardless of where the debt came from, however, it must eventually be paid back. While options like bankruptcy are available for those with undue hardship, basic money management techniques can help you pay back your debt as seamlessly as possible.
Money Management Reminders About Debt
As you craft your money management strategy to repay any outstanding debt, it’s important to keep certain factors in mind. Being strategic with the way that you pay back debt can save you both time and money. Remember these 3 truths:
1. Not all debt is bad. Since being buried in debt can be emotionally draining, keep in mind that not all debt is bad. It’s normal and good to invest in a home or college education! Just remember to borrow what you can afford.
2. Not all debt is good. While some debt is good, debt being spent for leisure needs is bad! It’s important to exercise self-control. Whether it’s cutting out dinner and a movie or being stricter with your vacation budget, avoid building debt for leisure activities.
3. Not all debts are equal. Take out your monthly statements and determine which debts have the highest interest rates. You’ll want to pay off this debt first, as this is where the interest will accumulate the fastest. Keeping money management tips like this in mind can help you save hundreds – or thousands of dollars.
Also remember that you can always shift where you’re paying down your debts. Many households, for instance, place so much effort on paying off their mortgage while interest accrues on outstanding credit card debt. Instead, just like investing, diversifying how you pay off your debts is a smart budgeting technique you can consider alone or with a money management expert.