Debt management strategies
The following simple debt management strategies will assist you in reducing
your debt exposure and let you have fewer sleepless nights worrying about
your debts.
Debt management strategy 1:Get rid of credit card debt
The first debt management strategy : It is plain and outright stupidity to
max out your credit cards and get into serious credit card debt.
This debt management strategy is often the most effective since credit card
debt is often at the highest rates of interest and you could be paying 20-25%
interest to the credit card company. In comparison, a personal line of
credit or a personal loan from a bank will have a much lower rate of interest. You
should visit your bank and check if you are eligible for a line of credit.
The other option in this debt management strategy is to get a new credit card
at a lower overall rate of interest - however shift to a line of credit at a
bank when you are eligible and gradually get rid of both the credit card debt
and the line of credit debt.
Debt management strategy 2:Mortgage refinance your home loan mortgage debt
This could your most important debt management strategy- since your mortgage
home loan is probably your biggest debt and your biggest asset as well. If you
have a home loan mortgage debt that you have been paying for at least 3-4 years, the
first thing you need to do is to check the possibility of mortgage refinance for
better debt management
Your personal credit rating may be different from the time you got the
mortgage home loan and interest rates could have changed drastically to make you
consider mortgage refinance debt- essentially you get a new home loan at a lower
interest that pays off the older home loan. A caveat for this particular debt
management strategy - there could be administration and other finance charges
involved in foreclosing the older loan and starting a new mortgage home loan, so
working out the detailed math for this debt management strategy is essential
Debt management strategy 3:Invest wisely!
This debt management strategy basically says that 'Thou shalt always invest,
diversify my investments and invest as per my risk profile'
This debt
management strategy has the following three golden rules
Always stay invested-
Dont let your hard (or hardly!) earned money rot in a checking account of
the bank - keep investing the money wisely- investing to make a profit is
better than worrying about debt management
Diversify your investments- Along
with debt management,invest in multiple channels - be it a money market profile
, a mutual fund or an individual stock- dont put all your retirement gmoney eggs
in the same basket
Invest as per your risk profile- Just as we at
financeinfoline.com do not tell you which debt is better, we do not intend
to tell you to invest only in stocks, or only in real estate. You should invest
in riskier ventures such as stocks if you feel you can withstand the
possible loss, but you should only invest in non-risky ventures if you prefer
steady safe investments to riskier investments
Debt management strategy 4:Keep at least 3 months expenses worth of liquid
cash
This debt management strategy is really important for you and your family-
Keep enough money to cover any medical or any other family emergency. We at
financeinfoline.com are risk averse in debt management and advice you to keep at
least 3 months expenses worth of liquid cash.
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