Credit Repair and Debt Consolidation - 10 Tips to Manage Your Finances Better

In this age of increased consumer spending, we live in a world in which temptations abound, and buying on credit – whether it is a new music system or a new home – has become the norm. However, in this situation, a very thin line separates us from the dreaded debt trap, which can truly be a vicious cycle.

Joel Harris, a New York-based financial consultant, says nearly 40% of his clients now are people who find it unable to break through the debt barrier. “Taking out a loan has become easier than ever before, and an astonishing number of people don’t read the fine print when they sign on the dotted line, with the result that before long, they find they are saddled with a debt they didn’t even know was building up.”

Carelessness while negotiating a loan is only part of the problem. Vera Mulvane, a freelance financial writer, says the major reason why so many Americans are in debt is poor money management. “You don’t need a degree in Economics to figure out what your monthly expenditure should be, but I am constantly amazed at how a lot of people simply don’t plan for the future and simply think of today,” she says. “Credit cards, in particular, lead to a lot of reckless spending.” According to a 2004 survey, 43% of American households with more than one credit card carry an average debt of $8,000.

The single most practical way out of a debt trap is a debt consolidation loan, which brings all your debts under one umbrella and enables you to deal with a single new lender rather than several existing ones. In effect, you borrow a consolidated sum of money to pay off all your debts, and repay this consolidated loan in low-interest installments.

However, other than a debt consolidation loan, how well you manage your money will also reflect on your debt sheet. So here are 10 tips to help you manage your finances better:

1. If you carry more than three credit cards, beware! You are a prime debt trap candidate. So surrender your excess credit cards and watch your spending fall.
2. Wherever possible, replace your credit cards with debit cards. Because the money comes straight out of your checking account and there is a clearly defined limit, a debit card discourages you from spending too freely.
3. If your debts are relatively low and you have a good credit history, consider zero interest credit cards.
4. Always pay your bills on a particular day of the month so that you know you will have to allocate a certain sum of money for this purpose on a fixed date.
5. ALWAYS pay more than the minimum amount due on your credit cards to keep ahead of your repayment deadlines.
6. Keep a regular tracking system in place to make sure that you aren’t spending too much.
7. Force yourself to save. In other words, open an account into which you will deposit a fixed monthly amount, to build a nest egg that you WILL NOT TOUCH except in a dire emergency.
8. If you invest in stocks, bonds, or funds, consider low index funds that eliminate the need to pay a high commission.
9. Do not use an ATM more than a stipulated number of times per month.
10. Consider selling some of your assets to reduce your debt.