Debt Management Tips-How Baby Steps Can Free You From Debt

Debt Management Tips-Why Take Baby Steps?
Common wisdom teaches that if you are in debt that you should pay the debts with the highest interest rates first in order to avoid finance charges and pay less money in the long run to becoming debt free.

Another school of thought regarding debt management is that you should pay the smallest debt first. The idea is that when you see those smaller debts marked "paid in full," it creates optimism and a sense of progress for the one in debt that enables him to keep going until all of the debts are paid off. This snowball effect is a great motivator and might help you win your debt-free status.

Debt Management Tips-Build An Emergency Fund
Prior to beginning your blitz on debt, accumulate an emergency fund equivalent to about two months of expenses. By doing this step first, you will ensure that when the inevitable emergency arises which requires cash, you will have the money to cover it without creating more debt for yourself.

In order to save that much money quickly, consider overhauling your budget, selling off possessions or taking a second job. The faster you accomplish this step, the faster you can begin your debt management plan in earnest.

Debt Management Tips-Keep A Progress Chart
When you have your emergency stash of cash, you want to focus on the smallest debt and pay as much as possible on that debt every month until it is paid off. It is okay to pay only the minimum payment on the rest of the debt during this process.

Your goal is to get that first balance down to zero as soon as possible. Keep a chart of your progress. Often, a visual reminder of your progress is a great motivator and the same is true when you are attempting a serious overhaul of your debt management plan. Just like stickers for young kids in school when they do a good job, any visual reminder of what you have accomplished can keep the momentum going.

Once you have paid off one small debt, re-focus your efforts towards the second smallest debt. You should take the money you formerly used to pay the first small debt and add it to the minimum payment on the second smallest debt. Be systematic in your efforts towards debt management and you will find yourself in a debt-free situation sooner than you can believe.

The important thing to remember though is not to waste all this hard work. Never let yourself get in the same debt situation again. Once the debt is paid off, start saving money and planning for the future and continue with a positive debt management and avoidance strategy.