ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

How To Manage Debt

Updated on October 6, 2009

Back In Control

How did I ever get in debt? Well, first off, my parents never taught me about credit cards and interest rates, etc. So, when I first got married, my husband and I started using credit cards. I didn't understand how compounded interest works. If the interest rate was 10%, I figured if I borrowed $1,000.00, I'd only be paying an extra $100 back. We could afford the minimum payments ~ what a deal! Truth of the matter is, even if you borrow $3,000.00 at a 1.99% interest rate and just pay the minimum, it'll take you 7 or 8 years to pay it off!

Years later, I realized we just kept using our revolving credit and it never seemed to get paid down. I read a book or two about money management, and the way we got OUT of DEBT was to pay extra on the higher interest credit cards first. Once those credit cards were paid, we then paid extra on the lesser interest credit cards.

To protect your credit score, never charge more than 30% of your gross balance available on any card. If you must be in debt, keep the interest rates as low as possible. Transfer higher rate credit card balances to lower rate credit card. Your payment might be a little higher each month, but if you can do it, DO IT.

To keep your credit score strong, don't close your lines of credit, even if it's paid in full. When you close a line of credit, your credit history for that closed account is no longer reported to the bureaus. On the other hand, sometimes it's advantageous to close those high-interest credit lines because available credit may be used in analyzing your DTI (Debt To Income Ratio) when it comes to a major purchase.

Speaking of "borrowing power", if you own your own business and take so many write-offs that you really don't show much of an income, should you ever need to make a major purchase, this may hurt you. You must show the income/ability to re-pay that loan.

Monitor your credit report always. Some credit card companies offer a quarterly report from one major reporting agency for maybe $5.00 a month. Otherwise, you're entitled to a FREE copy of your credit report annually from one of the three bureaus. Remember that every time your credit is run by a potential loan company, your score gets dinged.

Managing one's own debt is the safest thing anyone can do. But don't charge what you can't pay off in a reasonable amount of time. This will protect you when your creditors change their terms (increase the interest rate) and/or reduce your credit limit, causing you to be in a higher percentage of debt on that card! President Obama is aware of these tactics and hopefully will be able to stop creditors from victimizing people.

And, you might not think this is important, but NEVER be LATE on your payments, not to the credit card company, and not to any creditor that appears on your credit report. Every late payment is recorded and can make or break your loan approvals when you really need it.

If you bought a home and were forced to get into it with an adjustable rate mortgage (ARM) like I was, as soon as my mandatory term on the ARM was complete, I REFINANCED into a FIXED rate, and I bought the interest rate down, saving thousands more over the term of my loan. Also, try to pay at least one extra house payment per year. You'll save tons more money than you invest that way! Another way to accomplish this is making 1/2 your house payment every two weeks. It ends up to be an extra payment per year just the same. I used to just divide the extra payment by 12 and up my monthly payment by that amount.

Don't cash in your 401K! That's a big mistake. Keep your investments working for you, no matter how badly you may be in debt. Save your pocket change; do whatever you can to save some money for those rainy days, because they WILL come.

Living debt-free (or managing your debt SMARTER) is the wealthiest way anyone can live. I've met people who make tons of money, but have no life because they have the bills keeping them bound up like a convict in handcuffs. Budget, and do everything you can to take control of your debt. Be patient, follow these suggestions and you will eventually be back in control! 

Comments

    0 of 8192 characters used
    Post Comment

    • Shepherd's Lamb profile imageAUTHOR

      Shepherd's Lamb 

      9 years ago from Roseville, CA

      lol ~~ you are so funny, brother! Oftentimes I don't understand something I haven't participated in, so perhaps you are one who has no snare to get out of! Hallelujiah for that!!

    • no body profile image

      Robert E Smith 

      9 years ago from Rochester, New York

      No offense sister, but for me to understand this, I might just as well be trying to read Chinese. I know the words mean something (well written too) but I'll be switched if I know what that something is. I'll let the money woman look at it. That's another reason God gave her to me.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)