Deconstructing Debt: What You Need to Know about Debt Management

You just earned your first degree. You cannot wait to get out there and experience the wonderful thing that is called independence.

Conversely, you have worked in the same position for close to 30 years, and as you approach your looming retirement, you are ready to experience the wonderful thing called independence.

Then, reality strikes, and at whatever stage of the game you might find yourself, managing your debt becomes a big part of your lifestyle.

The first temptation would be to ignore the increasingly high stack of bills, wishing them away. For many, not paying debts, or worse yet, not addressing them with creditors can send you off to charge-off inferno. However, you do have choices.

Continue reading to learn what you should know about managing debt and start moving towards an easier-to-manage future.

Debt Consolidation

Debt consolidation can be a lifesaver for those drowning in debt.

You can consolidate your debts to avoid paying excessive monthly interest for each obligation.

The best programs combine all of your amounts into one loan. This works for the consumer because the amount that is due every month is usually much less than paying varying amounts to creditors.

The smart way to do loan consolidation right is to go in with a plan. Your plan should always consist of setting a minimum amount you need to pull all of your obligations into one debt.

Best practices include figuring out the length of the term of your loan, checking for fees associated with (origination and prepayment fees), and then comparing loans.

Transfer Balances

Consumers with numerous credit cards can also transfer balances to avoid paying excessive amounts in interest rates.

While most credit cards have higher rates, many banks offer zero-interest balance transfers that allow you a certain amount of time to pay off the principal balance transferred to the new card, but you have to pay off the balance before the grace period ends.

This method works best if combined with a strategic budget that focuses on becoming debt-free.


Whether you decide to consolidate your loans or simply transfer balances on your credit cards to regain control of your finances, the next step would naturally be setting up a plan to pay off existing debt. You can approach paying off debt in two ways.

The first way simply dictates that you pay larger debts off first. With a debt consolidation loan, you simply pay on the balance whittling it down to zero.

With the extra cash, you can save or you can apply the extra to other major debts you might have incurred (mortgage and school loans). The other option dictates that you pay on the larger obligations first, and then when the loan is paid off, you apply the extra money to other debts. At some point, you reduce your debt.

Create an Emergency Fund

It is often stated that it is easier to pay down debt than to save money, and this statement is especially true when you cannot see the end of a financial quagmire.

However, by having an emergency fund of a few hundred dollars, you avoid the trap of using revolving debt to pay for expenses. Because this fund is your emergency cash, you never, ever, ever touch this money unless absolutely necessary.

While it might be difficult to start saving at first, set a goal to save a certain amount over time.

By saving as little as $20 per pay cycle, by the end of the year, you would have saved over $1,000. In terms of interest, you do not get much on a passbook account, but in the long run, you have peace of mind knowing you can cover an emergency.

Plan a Financial Lifestyle

Managing debt does not have to mean the end of credit for you.

As a part of managing debt, you develop financial acuity that develops into lifestyle habits, good, bad, or in between.

Whether you decide credit is not for you and toss your credit cards forever promising to remain debt-free or whether you only use credit for specific purchases, the key to managing debt is a very personal one and sets the tone for the rest of your financial life.