10 Debt Management Tips That Are Sure To Save You Money

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Use these debt management tips to get your debts under control and put money back into your pockets where it belongs.

DEBT MANAGEMENT TIPS TO AVOID NEW DEBT

1. Don't use debt to buy things that depreciate in value – The only time you should buy something with debt is if it's something that will appreciate in value or generate cash flow for you. Good examples are a home, investments, a business, or rental properties.

2. Follow a budget – the only way to stop accumulating bad debt is to always make sure you spend less than you earn. Follow a budget to manage your day to day spending.

3. Build an emergency fund - Save up until you have 3 to 6 months wages to cover unexpected expenses. This will protect you from having to use credit when emergencies come up.

4. Plan ahead for high ticket items – plan ahead for things like vacations and vehicle purchases. Estimate how much you think you'll need and when. Then start a savings account that you add to monthly to save up for those big purchases. This way you'll at least get interest on your savings rather than buying with credit and having to pay interest on a loan.

DEBT MANAGEMENT TIPS TO REDUCE YOUR BORROWING COSTS

5. Consider getting rid of the insurance – most credit cards, mortgages, and loans offer life insurance coverage to pay off the loan in case you pass away. This isn't necessarily a bad thing as it will help minimize financial hardship for you family if something were to happen to you. But you can usually save a lot of money by getting a separate term life insurance policy for the total amounts of your debts. Once you have that in place, cancel all of the extra insurance on your debts. I've seen people save over $100 a month by doing this. Go here to get multiple term life insurance quotes to compare. (Canadian? go here instead).

6. Shop for lower rates – don't just accept the interest rate that your given. Shop around for credit cards and loans that offer a lower interest rate. Then transfer your debts to the new accounts with the lower rates.

7. Maintain a good credit rating – You will usually be offered better interest rates on loans if you have a good credit rating. Making your payments on time and clearing up any mistakes on your credit report will help to improve your score. Check your credit rating annually to see how you're doing and to make sure there are no errors showing that could be hurting your score.

DEBT MANAGEMENT TIPS TO PAY DOWN YOUR DEBT

8. Consolidate – You can wrap all of your different loans into your mortgage or a separate unsecured consolidation loan. This will help eliminate any high interest credit cards and will usually free up some money for you each month. Just be sure that you use the money you freed up wisely. Most banks offer consolidation loans, talk to yours to see what your options are.

9. Consolidate and go one step further – when you consolidate your debts, you usually free up some money each month. Instead of spending this money, you could use it to make additional payments on your loan. For example, say you consolidated your debts and freed up $350 a month. If you then took that $350 and used it as an additional payment on your consolidation loan each month, you would pay off an extra $4,200 over the course of a year. Over time this will save you a lot of interest and get you out of debt significantly faster.

10. Snowball Your Debt Payments – This method works if you do not accumulate any new debts. Start by continuing to pay all of your debts as you normally would. Once one of the debts is paid off, take the monthly payment that would normally go toward that debt, and apply it to your next smallest debt. As each debt is paid off, keep applying the freed up money to the next debt on your list. This is called the snowball method because as each debt is paid off, the payment going toward the next debt on your list keeps getting bigger and bigger like a snowball rolling down a hill.

For more debt management tips, please check out our more popular articles listed in the box below, or you can see our complete list of articles about debt.

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