Last week, my 12-year old daughter asked me "Do you have debt, mommy?" She just asked me that question out of blue. Well, I found out later that it actually had something to do with her school lessons. At first, I answered her that we (my husband and I) don't have any debt. But on second thought, I told her that we do incur debt every time we swipe our credit card. But we totally pay for everything when the debt is due because we don't want to pay extra on interest.
I think that's the only debt we have. How about you? Do you know what you owe? Many people today tend to accumulate debt without thinking much about it. For some, it is plain irresponsibility. But it seems that a lot of people have become beset by this problem.
Consumers are becoming more trapped in debt than ever before. It's surprising that many do not realize how much debt they have. Each month, they see the credit card bills coming and take notice only of the minimum payment required. They don't consider the finance charges and the total account balance. If they just pay the minimum each month, in just a short time, their total account balances will be way over their heads.
Whether you're able to manage your debt well or you struggle with it, it's vital that you know how much you owe to each and every creditor, and how much you owe all in all. If you just ignore the numbers, it would be quite dangerous.
If you have no clue how much you owe, it's difficult to think of a plan how to resolve your debt.
If you don't have a good estimate of your total debt, now is the perfect time to sit down and make a list of your debts. Consider the following when you do your debt inventory:
Do you have credit card debt?List down the balance of each card's monthly statements. Just get your latest statements and add up the total balances. And while you're doing that, take note of your credit limit on each card. It's a good idea to start paying your balances and do not make charges to the credit card any more if you're really close to your credit limit.
Do you have any mortgage, car loan, or any other loans?Maybe your creditor is not sending you the monthly statements for these debts. Call up your creditor and ask how much is your balance. You should not forget to pay the monthly dues on these loans especially for home and car loans with equity. If you don't pay, you could lose your equity, your car or your home.
Do you have unpaid medical bills?I'm not sure how unpaid medical bills affect debtors in our country. But in other countries, non-payment shows up on the debtor's credit report. In some states, this may not be a big problem for obtaining credit, but the account is still there when creditors do a credit check. Still, you should list this debt in your inventory and consider paying it.
Do you have student loans?It's good that student loans provide the opportunity for some people to afford education. But don't forget to pay back after finishing college. Interest charges on student loans is relatively low, but if it can also add up if you don't pay.
Do you have other debts that are not yet paid?Now this is the tricky part. There are times that you borrow money from family and friends. Usually, they don't charge any interest but it doesn't mean that you should take them for granted and not pay. If you can't pay right away, it's your responsibility to let them know. The good-hearted lenders would understand. Try to pay little by little, it would be very much appreciated because it shows your gratitude and sincerity in paying what you owe.
The problem is if you borrow from high interest loans like 5-6 loans, title loans or pawnshop loans. If you don't pay, the debt adds up quickly and you will end up losing your collateral. As much as possible, stay away from these types of loans.
Once you have listed and summed up how much you owe, you'll most likely be more determined to get it all paid. The next move is to look at your spending habits and find ways to cut back on expenses. If you eliminate excess spending, you can save money for getting rid of your debt. Hopefully, you could be free from of it much sooner. You will surely love the wonderful feeling of knowing that you don't owe anything.
So, do you know how much debt you owe? What are you doing to manage it?