Debt Management Plan

The phrase “Debt Management Plan” typically refers “a method used in various countries for paying personal unsecured debts”. Typically such debts are out of control, late, incurring fees, very high interest rates. A DMP, or debt management plan, typically involves a third party that will look at the entire picture, income, debt, assets and will create a plan to address those obligations. This may involve negotiations with lenders for lower rates, payments, fee waivers, etc. Before making any financial decisions you should consult a licensed professional.

Ways to avoid debt management Typically debt management plans are only created for those in dire financial straits. This may involve the abuse of credit, hardships, divorce, or other difficult situations. However it may also strike those that are not financially savvy! Sometimes debt management may be necessary, however there may be ways to avoid debt management.

Create a budget! Understanding your financial situation is the first part of managing debt. By creating a budget you can understand your current financial obligations before taking on new obligations that you may not be able to repay. When you are budgeting, always budget more than the minimum payment on your credit cards. When possible you should always pay more than the minimum payment to help avoid interest charges.

Confront your credit cards! It’s quite easy to say, “stop using that credit card”. However it’s much more difficult to follow through with it. If you’re looking to reduce your debt, or financial freedom, stop using your credit cards now! If you continue to use them, pay in full every month. If you can’t afford to pay in full you should reconsider using the card. Revolving debt is great, when you can afford to use it! It is not extra money, it’s a financial obligation that has to be repaid!

Will power! Paying down your debt is much like sticking to a diet. You have to have will power to pay those things down! Set a goal and stick with it, remind yourself of why you want this goal. Is it to take a vacation? Buy a new home? Pay for college? Don’t think about the pain, think about the reward. Print out a picture of your favorite vacation spot and hang it in a visible area. Promise yourself once you pay off your credit cards, you’ll start saving the money you were paying to your credit cards to take that vacation. Stay motivated!

As always you should consult a financial professional before making any financial decisions. The information contained here is one individual’s view of this topic and should not be relied upon to make financial decisions. We are not liable for any decisions made based on the information above.