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Strategies to Manage Your Debt

Millions of Americans are dealing with debt overload every day. If you are struggling to pay your loans, credit cards, or other bills, here are some steps you can take to begin managing the problems.

Create a budget. Budgeting gives a clear picture of what you can afford so you can balance your income and expenses. 

Try to get a clear picture of your monthly income and expenses. Even if you have a regular weekly, bi-weekly, or monthly paycheck, budgeting enough money to pay your bills and pay down debt may not be easy. Also, many individuals have incomes that vary considerably from month to month because they work on a contractual or temporary basis with hours that equate to full- or part-time work. For them, budgeting can be tricky, especially when they are trying to pay down debt. It is important to know what money you have available and your priority expenses so accidental overspending is not an issue.

Contact your creditors about ways to make your most important bill payments easier. Many people find it helpful to schedule their essential monthly payments sometime soon after the deposit of their first paycheck of the month. In that case, you can ask your lenders, utility providers, and credit card issuers to change your monthly billing-cycle date to line up with your first monthly paycheck.

Also, if you think you cannot make payments as scheduled, you can be proactive and ask your creditors to consider an extended payment plan that results in lower monthly bills. Keep in mind, though, a longer payment period could mean paying more in interest. Discuss a payment plan that can help you avoid getting too far behind. 

Have a strategy for saving money on interest and fees. Consider paying off debts with the highest interest rates first. Also, avoid late fees by making sure all bills are paid on time. You can track payment due dates on a calendar or use your bank's online bill-paying service. Many banks offer this service, which allows you to see all of your bills in one location online and make payments directly from your bank account.

Consider getting help from a reputable credit counselor. Many companies and public service organizations offer assistance in creating a budget and learning to manage money, including debt, often for free or at a low cost. The Credit Repair Organization Act requires companies and service organizations to explain the following: the total cost of the service, timeframes to see results, a written contract of the service you will receive, and your right to cancel service without being charged within three days. 

Also, be on guard against companies that promise to settle your debts or erase a bad credit history if you pay a big fee upfront. These may be scams to steal your money and perhaps valuable information like your Social Security number without delivering on their promises.

Know your rights if a debt collector contacts you. Debt collectors have rules they must follow under the Fair Debt Collection Practices Act, such as providing you with a debt validation notice stating the amount you owe and the creditor's name. When and how often debt collectors can contact you is limited.