How to manage debt

If you find yourself struggling to pay your bills and you are looking for assistance in sorting out your finances you should find out as much information as you can to help you get out of debt.

Here are some tips to help you reduce and eliminate your debt.

  • Carefully examine your budget. Prioritize all of your bills in the order that you are going to pay them. Focus on your basic needs first (expenses necessary to survive): housing, food, utilities and transportation.
  • Prioritize your spending. If you are struggling to pay your bills, you must cut out spending money on entertainment, eating out, vacations and spending money on anything that is not necessary for your survival.
  • Save money on groceries. Definitely cut back on your grocery bill. If you cannot afford to pay your bills you should not be buying expensive food that you do not need.

Pay Down Debt

Paying the minimum monthly payment on your credit card bills could take you forever to rid yourself of the debt, not to mention how much you will end up paying in interest.

Examine your monthly expenses and determine where you can find the money to pay more than the minimum monthly payments.

Bank Online

Paying bills online allows you to bank 24 hours a day, seven days a week, pay your bills on time and you can avoid bank lines. Banking online also lets you monitor your spending and keep an eye on your balances.

Consolidate Your Debt

If you have a large amount of debt, combining it into one lump sum with one payment per month is a good option. If done correctly, debt consolidation could help you manage your finance and decrease your debt stress level.


  • Do not borrow any more when you are under a debt management plan.
  • Stop using your credit cards.
  • Restrict your spending.
  • Focus on saving money.
  • Focus on your goal of payments.
  • Try to get an additional part time job to help pay off debt.
  • Your mortgage should be a priority; you do not want to lose your home.
  • If you cannot afford to keep your house, consider selling it - that may relieve a lot of your financial burden.
  • If you are paying for a car and cannot pay your other bills, consider selling the car.
  • If you cannot pay your car loan, contact the bank for assistance before it is repossessed.

Work with your creditors

Before you fall behind in paying your bills contact your creditors and explain the situation so that you can work together to find a solution.

Show them your budget and discuss how and when you intend to pay them back. Ask about temporarily lowering or suspending your payments and put everything in writing because these steps may not save you from getting bad credit, but it shows that you are making an effort, and it may help you if you end up in court.

Manage Credit Card Debt

Are you having trouble paying your credit card bills?

Do you want to take control of your debt?

Start by honestly evaluating your spending habits and then consider the following steps to help you manage better.

Remember, you are not the only person with this problem; however, in order to get out of debt you have to start immediately.

The key thing to remember is if you are serious about clearing up your credit card debt (and finally seeing a statement with a zero balance) you will most likely have to give up something.

If you can pay off some of your debts in full then by all means do so. Consider what you can sacrifice to pay off debt. Do not focus on just the minimum payments, look at what you are spending money on every month and decide what you can go without so that you get out of debt.

Put together all of your monthly financial information, including all of your monthly income, expenses and especially your credit card debt; interest rates, balances, and current minimum payments.

Organize and analyze the key information. Itemize the credit card interest rates from high to low. You will need to do this again except use the balance information as the determining variable. Then determine the minimum payments and add them up.

If you can afford all the minimum payments then you are in a good position. If you can’t then you should consider a debt management programme with the lender.

If you can afford to pay the minimum balance on all of the debts, do so except the highest ranked on the list (the highest interest rate). The highest ranked card should receive all of the money you can afford to part with until it has been completely paid off.

Once you’ve reduced the balance to zero, cross that card off your list and put it in a safe place (do not cancel the card; a zero balance will look good on your record or you may need it for an emergency). Do not charge to it again until you are in control of your finances and only when you need to and can afford to.

Continue this process until all of your accounts are paid-in-full.

How to Handle Debt Collection

When you owe money the person you owe it to is considered the creditor. If you do not pay this money there are various methods creditors can use to collect their money.

Late Charge Fees on Overdue Accounts

Some businesses add a late fee or penalty charge to accounts that have not been paid by the agreed time period or due date. The amount may vary and if you were made aware of a late fee penalty and agreed prior to services being rendered you are responsible for this charge.

Debt Collection Fees

Many local businesses will refer customers owing money to a local debt collection agency. Debt collection agencies charge a collection fee in addition to the amount of the debt. Be aware when you do business with a company if they are a member (and use) a debt collection agency.

If you have been contacted by a debt collection agency do not ignore them. Ignoring the problem will not make it go away – in most cases it makes the problem worse and the debt will most likely increase. If you agree that you owe the money, make arrangements with the agency to repay.

If you are in agreement that you owe the money and are paying through a debt collection agency, contact them and work out a payment plan before you make any payments. Once the plan has been agreed by you and the debt collection agency, get it in writing and remember that it is important to:

  • Make regular, timely payments;
  • Always read your monthly statements promptly to make sure your creditors are getting paid according to your plan;
  • Contact the debt collection agency responsible for your debt if you have questions, if you will be unable to make a scheduled payment, or if you discover that creditors are not being paid;
  • Keep a record of all your communications with the debt collection agency.

If a debt collector is trying to collect more than one debt from you, the collector must apply any payment you make to the debt you select. A debt collector may not apply a payment to a debt you don’t think you owe.

If you don’t pay a debt, a creditor or its debt collector can take you to court for a judgment. If they win, the court finds judgment against you the creditor or collector can get a garnishment order against you, directing a third party, like your bank, to turn over funds from your account to pay the debt.

Wage garnishment happens when your employer withholds part of your compensation to pay your debts. Your wages usually can be garnished only as the result of a court order. Don’t ignore a lawsuit summons. If you do, you lose the opportunity to fight a wage garnishment.

If you dispute the amount of money a creditor says you owe, do not ignore the notice or phone calls. Advise the agency and the creditor (in writing) that the debt is being disputed and why. Make sure you have supporting documentation (evidence) if possible. The creditor may wish to stop any action until matter is resolved (only the company who is owed the money can stop any action).

If the matter can’t be resolved the creditor or collection agency may then take you to court to recover the money owed.