My Insurance Insider and Finance Blog

Image via WikipediaEveryone likes quick-fix solutions and love to get ready-made answers for all our problems. Debt is one of issues that we often face in our everyday life.But before we adapt to an effective debt management method, we need to first identify the route causes or sources of our debts to get rid of the menace we face.

The sources of debts:

• In-effective money management
• Underemployment/Underpaid
• Separation/Divorce
• Cut back Income,but with same expenses
• Gambling
• High Medical Expenses
• Savings too little
• Lack of financial knowledge
• Lack of money communication skills
• Banking on windfall

In fact you can’t deny that the longer you are in debt, the more interest you would pay. For instance, if you’ve taken a 30-year term housing loan, the total amount of interest may eat away your financial resources to a great extent. Here the notion is the faster you clear your most expensive debts,the more money you would save.Experience and common sense tell us that people who are in terrible debts find them there chiefly because of mismanagement of funds. And this is the time when we make even foolish mistakes or not effectively use money at our disposal.Experts believe that in no case your total monthly debt should be more than 40% of your monthly gross income.To be on safer side, some experts even want to set it below 30%

Now that you’re in major debts, your first and foremost duty is to jot down all your income and expenditure on paper so that you can remain vigilant at what comes in and what goes out. Make sure to have separate columns and total the standard outstanding dues such as your monthly utility bills, food, clothing, shelter etc. You can then evolute your necessary luxury spendings.

Once you’ve sieved through, you can identify your wants from needs.But you should always guard yourself against the tendency of impulse buying. Make sure to remain extra vigilant to hold you back at buying the unnecessary things you can well live without.Don’t purchase stuffs looking for their future use.

Now calculate how much of minimum balance you have to pay for each of your debts. Once you get that figure, and you have something left as balance, add that amount to one of the minimum debt payments that attract highest rate of interest. In that way you can steadily clear the costly debts first.

But what if you don’t have a left off balance?There is a way out here as well. Debt consolidation loan! Take this loan and pay off all the irritating debts. You always need to ensure that you’ll maintain the monthly installments without fail. Check around to see who offers the lowest rate of interest.

Additionally some other drastic measures help you clearing your debts fast.You could even think of dropping a few of your unsecured credit cards.Making sure not to get into new debts whatsoever is the fastest way to get out of debt.

Make your minimum monthly payments on time. This will ensure that you do not get any late payment fines or penalties. You may think of transferring your out standing debt to a credit card that has a lower rate of interest. This way you can pay more and clear the debt faster.

Always employ the two-pronged approach - never accrue new debts and steadily clear costly and old ones first.