List Your Debts

Not all debt is created equal. Some debts you might include on your list:

1. Overdrawn fees at the bank

2. Money owed to friends or relatives

3. Layaway bills at a local store

4. Credit card debt

5. Home mortgage debt

Look at How the Debt Works

If you write a check on a bank account and there is not enough money in the account, the bank will charge you an overdrawn fee. Once you deposit more money into the checking account, the bank will automatically take what you owe them. You have no choice. The bank takes what you owe.

If you own money to a friend or relative, you need to be responsible and talk to them. Explain your situation and ask to write up a new agreement, listing how much you will pay and when, until your debt is paid off. Be honest and fair. Do not ask that they make the loan to you a gift (and not pay them back). That is a good way to lose a friend.

Layaway is used by some stores so that you can choose what you want to buy, they hold it for you, and you make payments. Only when it is all paid do you get to take it. Look honestly at your financial situation. If you know you cannot finish paying for it, go to the store and tell them. You may or may not get money back you have already paid. But it makes no sense to continue to pay and then default later.

Credit cards are very risky if you cannot pay off your entire debt every month. It may be tempting to only make the minimum payment every month, but the sweater or laptop you purchased with the credit card can end of costing you several times the actual price of the item that way.

Home mortgage payments are due the same date every month. It is important to pay on time and to pay every month. By not paying, your credit score will be affected. You may also lose your home if you miss multiple payments. You won’t get back any money you paid, but you can lose the home.

Taking Care of Your Debt

The most important point is to spend less than your paycheck. By doing that, you will be able to set aside some money every month for a wish list or future expenses. Next, do what you can to explain your situation to all your debtors, including friends, credit card companies, and the bank holding your home mortgage. Be honest and ask how they can help you. Lastly, pay all debts on time. If you still need more help, look for county or state agencies that offer free services.

Taking care of debt isn’t all that hard. Make your checklist, know how the debts work, and work hard at it. As long as you have discipline, and you have a plan for the future, you’re going to take yourself very far.