Personal debt has unfortunately become a way of life in the 21^st century with levels reaching all time highs. Easy credit, a have-it-now mentality and the consumer-driven society have all created this situation. A recent survey in the US showed that increasing numbers of people are filing for bankruptcy as their debts reach levels they simply cannot service. Managing your debt is vital if you are to avoid going down this road.

There are some simple ways to manage your debt and you will find four helpful tips here in this article. I learnt many of them from personal experience when I realized that I had to do something about my credit card debt that was spiraling out of control. I was spending more than I earned, using my several credit cards to buy just about everything and paying off one balance so I had enough credit to pay another. Does any of that sound familiar?

When I came clean with a couple of my friends, I discovered that they were in a similar situation and they knew others who were also struggling with high debt levels. We made a pact to gather information and share ideas for managing debt. I’ve got to say, talking about the problem really helped and I felt good knowing I was doing something about it.

One of the things we found out was that debt, in itself, isn’t necessarily a bad thing; it’s the volume of debt that becomes a problem. I mean, debts like mortgages, student loans and car loans are almost a necessity in this day and age; the trick is to keep your repayments below 30% of your income. The total of all your repayments on loans, mortgages and credit cards must be less than one third of what you bring home in your pay packet. This is the first tip for managing debt; do the math and work out exactly where you stand financially, how much you owe and what your repayments are each month.

The best tool for getting a very clear picture of your financial situation is a personal budget. If you don’t have one, create one; it’s the best way of seeing at a glance what you have coming in and what your commitments are. A budget also shows you where your money goes; some spending patterns might come as a bit of a surprise. Look some areas of spending where you can cut back, to help you get rid of excess debt sooner.

Like me, you were probably way over the 30% figure when you realized that you were heading for financial trouble. So the next thing you need to do is look for ways to reduce your commitments. I was told by a financial advisor to contact my lenders and credit card companies and negotiate a better deal. He said that credit companies want their money back and most are prepared to cut you some slack to help to get your debts under control. They have a better chance of getting their money if you can manage your debts rather than declare bankruptcy.

I tell you, this was one of the scariest things I’ve done but I was amazed at how kind and helpful every company was. I simply explained my situation and asked how they could help me meet my commitments. So this is tip number two – contact your creditors and ask for their help. What I found was that some were prepared to waive repayments for a few months; one restructured my loan and reduced the repayments, while one company actually lowered my interest rate. I would never have believed a structured settlement like this could happen. When I shared this finding with my friends, they all did the same and got similar results.

This tip led one guy to investigate different interest rates. He found one company which offered a competitive rate and was prepared to consolidate some of his debts into a lower interest loan. He reduced his monthly commitment as well as saving big time in interest. It certainly pays to shop around; I started looking for credit card companies that offered a better rate than I was paying. I found one company with a really good interest rate and I was able to transfer three of my biggest balances and pay a really small rate for the first six months. It felt great to cut up those three cards, knowing how much money I was saving! The third tip, therefore, is to shop around for better interest rates and look for companies that will consolidate several loans into one.

Use these four tips to start to get some control over your finances by managing your debt. Use any money you save to throw at other debts to help reduce them faster. Make debt reduction your focus to get the fastest results. Good luck!

So, how have you managed your debts in the past? What is your story?

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