Personal Debt Management

While Americans enjoy what seems to be a bulletproof economy, at least for now, personal debt continues to rise. The vast majority of our economy (around 70%) is made up of consumer spending. For now rising oil prices and a declining housing market have yet to slow our economy. Consumer spending has continued to overshadow these other potential issues for our economy. But it is not without a price! That price is the massive amounts of debt carried by the consumer. Sooner or later, if you are carrying a lot of personal debt, you will need to tackle it. The best time to do this is when the economy is still doing reasonably well. And of course the longer you wait to do it, the bigger the sacrifice it will take. Using your personal debt burden will not only improve your financial health, but he can go a long way with improving your mental health as well.

There are several simple steps you can take that will quickly start to tip the scales in your favor. Many people think that increasing their income is the only way to truly get out of debt. And although increasing your income will certainly go a long way towards getting rid of your debt, it is far from the only way to get the job done. For most of us, having a healthy financial life requires us to live within our means. In recent years the banks and financial institutions have made it easy for us to live outside our means. They have been more than eager to extend credit to people without concern for their ability to pay it back. And unfortunately for many of those people, one late payment on any credit account is now resulting in higher interest rates on all their debt.

The good news is, there is light at the end of the tunnel. Apply some of the following steps into your personal financial life, and you can quickly have a brighter future.

Stop Unnecessary Spending.... in order to reduce your debt you need to lower the balances. It's a lot easier to hit a stationary target than one that keeps moving. Stop the bleeding now, no unnecessary tapping into available credit. Your balances will go down a lot faster if they stay where they are right now. Remember there is a big difference between what you need and what you want!

Cut into Those Balances.... now that those balances become a stationary target, it's time to start paying them down. If you're able to get over time at you job, take it. Consider working a part-time job. Maybe a few nights a week, or even over the weekends. Apply any extra income you make directly to the debt. Cash in your Cd's or money market accounts at the bank. The interest your earning on this money is likely inconsequential compared to the interest being paid on your debt. I wouldn't recommend using your entire savings towards your debt. It's always good to have some cash sources available in the event of an emergency. But only keep as much as you need, apply the rest directly to your debt. If you can take a loan on your 401(k). This way you'll be paying the money back to yourself.

Reduce Your Spending.... Take a good look at where your money is going. Do you eat out a lot? If so, prepare these meals at home. Do you have the premium cable package? Drop it down to a cheaper package. Take a good look at all your utilities such as cell phones, Internet service etc.. Trim some of the extra fat you don't really need. Remember the old adage, a penny saved is a penny earned.

Prepare a Monthly Budget.... the proof is in the pudding! Sit down and prepare a monthly budget, see where all your money is going. You probably don't realize how much money you're wasting. When you get it all down on paper, you'll be amazed at all the opportunities there are to save money. Many families have a hard time realizing just how their money is spent until they can visualize it on paper. You'd be amazed at how far a little sacrifice can go towards getting you out of debt. Work out your budget together as a family.

Make Your Purchases in Cash.... by paying in cash you will not only realize exactly how your money is being spent, but also stop paying interest on your purchases as well. Paying with credit all the time is deceiving, you're spending money but still have cash in your pocket. When you run out of money, time to stop buying.

Adjust Your Withholding.... if you get a big tax return every year, you probably are having too much money withheld from your check each week. Adjust the withholding accordingly. The federal government does not pay you interest on your money all year long. That extra money each week can be applied directly to your debt.

Check Your Insurance.... verify that you are not over insured. It's not necessary to carry $1 million in life insurance when you only need $250,000. See if you can get better rates by combining your automobile, homeowners, life and other policies to one company. Shop the rates on all your policies to see if you can get better ones.

Garage Sale.... sell off any household items that you don't any longer use or need. If you're laying out monthly fees for a storage unit get rid of it. Time to get lean and mean.

Part of having a sound financial life is learning to live within your means. As you utilize these steps to get out of debt you'll come to realize it's not that hard to live within your means. Many people are under the impression they have to sacrifice an awful lot in order to get out of debt. The truth is for most of us, a little bit of sacrifice along with some trimming of the fat is all it takes to brighten up the financial future. It will take desire and discipline to accomplish your financial goals, but when you do finally eliminate all of your personal debt you will find that it was worth every step you took.