Implementing a Good Debt Management Program


Living on a budget can be a painful process initially. However, if you are committed to managing your debts and eventually becoming debt free, you must find a way to manage your debts and control your spending.

Make a Budget

The first step to developing and implementing a debt management program is having a monthly budget. A budget allows you to know exactly what money you have to spend and where you are spending it. Although it can be tempting to just keep track of your money in your head, writing it down or using a money management computer program is much more effective. Make sure that you keep track of every penny you spend and evaluate your budget every month.

Set Up a Payment System

If you are using paper checks, a payment system can be fairly easy to manage and keep track of. You can take each monthly bill, write out a check and write the date it is due on the corner of the envelope. Then sort the envelopes according to due dates and each week, mail the payments that are due that week.

If you do not write paper checks, then you will need to use another system to make sure that you are paying your bills on time. For some people setting up automatic payments works best. By setting up automatic payments from your checking account, you can be assured that payments will be sent on the day you specify. The important thing to keep in mind when paying bills this way is that you must make sure that money is available in your account to pay the bills when they are due.

Making Extra Payments

Many people find that making extra payments to their credit accounts is an excellent way to quickly reduce their balance. With your budget in place, you should have an idea of how much money you have available each month to make extra payments. Choose the credit account with the smallest balance and make at least one extra payment toward that account each month.

Also, make a note on the payment that you want the payment amount to be applied to the principal balance on your account, not interest. By using this approach, you can quickly reduce your account balance and avoid paying larger amounts of interest.

As you pay off each account, set it aside and begin working on paying off the next one. By working your way through your smaller accounts first, you will be able to pay them off quickly, freeing up more money in your budget to apply to paying off the larger accounts.

Stop Adding Debt

One important key to remember as you work your way through your debt management program is that you should avoid adding debt. Take your credit cards and put them away. Keep one card to use for emergencies and make sure that if you use it, your reason is that you truly have an emergency, and no, the latest release of your favorite video game or a great shoe sale does not constitute emergencies.

Do not apply for new credit cards, loans or finance purchases. The goal of debt management is to get you out of debt, not make it possible for you to increase your debt obligations.

Staying with a debt management program can be challenging at times. You can make a game out of saving money with your family and kids. When you go shopping with your kids, encourage them to find the best price and to help you sort through coupons. By including them in your debt management quest, you will be teaching them good money management skills that will serve them into adulthood. By remaining committed to your own debt management program, you will be able to find relief from debt stress and find yourself on the road to financial health.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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