Income and Debt Management Advice
You may not know it, but many Americans today desperately need debt management advice. Most people who need debt management advice already know it. Their credit cards are maxed out, they are incurring late fees on their debts, and they are getting calls from bill collectors because they have missed payments on their charge accounts.
But even if you feel like your finances are under control, you can still use debt management advice, so you don't end up misusing your credit and find yourself under a lot of debt.
Find Out Where Your Money Goes
Before you can manage your debt, you need to learn to manage your income. This can be a painful process, but you must conquer income management before you can move on to debt management advice.
Most of us pay our bills once a month, so for one full month, you must keep a journal of every penny you spend. Whether you write a check, use a debit card, pay a bill online, or pay a bill by an automatic deduction, you must write it down.
At this point, don't worry about categorizing the money you spend, and don't try to reduce it. The purpose of this exercise is to get an accurate picture of exactly where your money goes, so spend money as you normally would.
Categorize Your Spending
Enter all your expenses into an electronic spreadsheet program. If you don't have a Microsoft Office application like Excel, use Google Documents, a free online spreadsheet application.
Use spreadsheet software instead of writing onto a paper account ledger so you can sort the columns and find out how much money you are spending at one particular coffee shop, or sort your expenses from highest to lowest. Eliminating your biggest monthly payment, like a second or third car payment can have a big impact on eliminating your debt.
Set up one column for each of these factors: Date, payee, amount, purpose, method of payment. Now enter all your spending for the entire month.
Highlight each column with a different color based on whether the expense is required or discretionary. Money spent for a property tax payment, for example, is required. Money spent for restaurant meals is discretionary.
Cut, Cut, Cut
Starting with the discretionary items, identify items you can cut that amount to 10% of your spending. Most people can easily cut 15% or more from their spending the first time they do this exercise. Eliminate coffee drinks, restaurant lunches, ATM service fees, and other discretionary expenses.
Follow the experts' debt management advice, and apply this 10% to 15% to your credit card debt.
