In today’s economy managing your debt is a must.  With everything costing more and people make the same or less, keeping your debt under control can help you make it through the lean times.  When managing your debt it is all about numbers.  Knowing the numbers will help you manage your debt.  Here are a few general rule or guidelines to use.

Debt Management Strategies

• Create and manage a budget. The best way to see where your expenses are going and where to cut expenses is a through a budget. If you are not sure how to create a budget look online. There are plenty of tools and programs that can assist you.

• Limit your housing expenses to 28-30% of your gross monthly income. This is recommended by mortgage lenders. For example, if your monthly gross income is $3000 your mortgage or rent payment should be no more than $900. Homeowners should also budget 2% of the homes value for repairs. A $200,000 home should have a repair budget of $333.00 a month.

• Limit your debt obligations to no more than 36% of your monthly gross income. If you have a monthly gross income of $3000 your monthly bills for credit card, student loans, cars, etc should be no more than $1080

• Never finance purchases other than major ones like a house, car, or education. If you cannot afford pay cash for items then save up and buy them when you have the money. The biggest issues are when people finance electronics, furniture, etc. Watch out for the no payment for three years (rooms to go) scams. What happens is that if you do not pay the bill off before it comes due all the interest accrued over those three years will be added to your total amount. Most of the time the interest on those loans is very high.

• Budget in for a savings and emergency fund. The rule of thumb is 10% of your income goes into retirement. If you cannot save 10% then start somewhere and build up. The compounding interest no matter how small the investment is huge. If you are saving for a major purchase that should be in addition to retirement. Having an emergency fund is crucial when you have a home and family. The standard that most financial planners go by is to have an emergency fund equal to six months of your income. Having this fund will help when you have a major expense or job loss.

• Call all your credit card, cable, cell phone companies etc. Look at how to change your plan around to lower your payments. With credit cards ask for an interest reduction every six months. This will save you a lot of money in the long run.

If your monthly debt exceeds 36% of your monthly income three things need to happen

• Stop your spending

• Cut expenses -not fixed expenses like cable, entertainment, extra curricular activities etc.

• Set up a plan on paying down the debt and stick to it. If you are having a hard time contact an expert they will be glad to help.

There are ways to reduce and eventually pay off your debt.  The hardest part is discipline and sticking to that plan.  If you can do that you will see great results.