Debt Management: Its Importance

"Debt can be the most addictive thing in the universe, and it can kill you. You get used to living high off the hog. It was intoxicating."    --Harvey Weinstein

Being buried in debt is both an overwhelming and painstaking experience in one's life. But don't worry, there's always a better way out. And once you'll be able to get out from it, do make a resolution that you will never get into it again.

You might be buried in credit card debts because of overspending. Or because you've had bad business decisions in the past that lead you to loan sharks. 

In managing your debt, there are two things you must do:

1. Consolidate Debt

Debt Consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. Not all our loan are interest-bearing. Sometimes we borrow money from families and friends and they never charge us for interest. In debt consolidation, we give priority to the loans which are interest-bearing and those which has higher interest rates. Instead of having loans from different sources, you have to find banks or lending institutions that would be able to give you a secured loan which has much lower interest rates than your existing loans combined. The lower the interest rates the better. It means you will save a lot of money that only usually goes to interest.

According to Debt.org, a debt consolidation service can lower your interest rates, lower your monthly payments, protect your credit score and can help you get out of debt faster.

Debt consolidation is not a debt solution. It merely combines all your debt into one single, more manageable loan. If your current monthly repayments seems smaller in figure, check if it is due to a longer loan term, for which you may be paying higher interest rates.

 2. Eliminate Debt

Being in debt can be a stressful experience. Regardless of your circumstance is, if you signed for a loan, you are obligated to pay it back even if you have an unexpected event in life like losing a job, accident, calamities or having a new child.

According to Clark Howard, here are the Five (5) steps to get rid of your debt:

1. Make a conscious decision to stop borrowing money
2. Establish a starter Emergency Fund
3. Create a realistic budget and stick to it
4. Organize your debt
5. Throw any excess cash at your debt

It is very important that you always remind yourself of your freedom day (the day you want to be 100% debt free) because it will help you establish your ground to start all over again---from someone who is buried in a deep-neck debt into a person who is debt-free!