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Chances are you know someone who is in debt. Or perhaps you are struggling with your own. Debt is something that is easy for people to get into, but it is hard to get out of. Without a debt management plan, bills can pile up, interest will accumulate and you can be caught in a vicious cycle of money problems. Having a plan will help you prioritize, structure your payments and put you on the road to financial freedom. But to make it work, you need to know where to start. Here are some debt management practices that will help.

Make a Budget

This may sound boring or difficult, but it is absolutely one of the most essential ways to manage debt. First, work out how much per month you have to spend, and which expenses are essential and which are optional. Make your budget realistic and realize that to get out of debt, some areas will be reduced or eliminated. Keeping track of expenditures lets you see exactly where your money is going. Record every purchase the same day or week you make it, and be sure to adjust your balances to reflect these payouts. Follow the budget strictly to keep it effective. If you are tempted to cheat, remember your financial goals.

Prioritize

This works well with budgeting and is another vital part of an effective plan. Determine what bills must be paid every month, such as utilities, groceries, mortgage and insurance. Pay these things first, then turn your attention to items like credit cards and medical bills. List these bills out by the total balance, minimum monthly payment and interest rate, if applicable. This shows you which bills need to be paid off first and how much your payment must be. Combine this with planning out your payments to achieve the fastest and best results.

Plan Out Your Payments

Make sure that you pay at least the minimum amount each month on each card. If you have extra money you can apply, put it towards the card with the lowest balance. That will allow you to pay that card off faster. Once one balance is paid in full, add the extra money to the next lowest balance every time you make a payment. Continue this method until you are able to pay all the debts off. It is a slow technique, but it adds up over time and you will see the benefits of it more and more as you go.

Negotiate a Lower Interest Rate

If you are in good standing on your credit card bills, call them and see if they will lower your interest rates. Explain that you are currently having some financial hardship and would like to have your rate reduced. When an interest rate is lowered on a credit card balance that means that more of your payment is being applied to the principal of the debt and not the interest charge. If they are willing to work out a new plan with you, this will help you get out of credit card debt much faster.

Consider Consolidation

If you have a high amount of debt but have good credit, consolidation of all your debts is another good option. You will need to be in good standing with your creditors for this. Consolidation is taking out a loan to pay off individual debts and then making a monthly loan payment.

You have two options for getting a consolidation loan: using home equity or taking out a personal loan. Personal loans usually have high interest rates, but they are fixed rates. Tapping into home equity means you will have to take out a second mortgage or get a home-equity line of credit. Make sure you review all the options for consolidating carefully before you make a final decision.

A good debt management plan is not always easy. It takes time to create it, and determination to follow it. But it will help free you from the cycle of living paycheck to paycheck, or not being able to take care of financial emergencies. Freedom from debt reduces worry and stress over finances and puts you back in control of your money and your life.