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That Four-Letter Word

Debt: it’s a financial swear, and its influence reaches almost everyone. As if continually heralded by fluorescent warning signs, we’re counseled to “stay out!” But we’re not heeding that advice: American consumers collectively owe more than $11 trillion.

Dealing with debt responsibly can help you avoid unrelenting creditor calls and financial pitfalls. Take control of your debt and manage it wisely with these seven tips.

1. Map it out

Only 32 percent of American households make a monthly budget, even though that’s the best way to avoid falling into consumer debt. Gather statements and track the money going in and out of your accounts using a free internet service like Mint or PocketSmith. There you can monitor your cash flow, establish appropriate goals, and make needed behavioral changes that help keep debt manageable.

2. Driver’s Seat

Managing car-loan debt starts before you leave the dealership. Stick to your budget no matter what the salesman says, and be wary of loans that will leave you upside down (owing more than the car is worth). Avoid getting stuck in a lengthy loan—pay it back within forty-eight months.

3. Plastic Power

Credit cards can be a high-interest hazard, but they can also be a financial tool if used properly. Swipe your card to purchase items you’ve already made room for in your budget. Then pay the card off before the billing cycle ends. This will help you to responsibly build a healthy credit score.

4. Doctor’s Orders

Medical debt is becoming one of the top reasons for bankruptcy in the United States. The expenses are often unexpected. It’s estimated, however, that 80 percent of medical bills contain errors. Manually review bills for mistakes or try Simplee, an online tool that manages healthcare expenses.

5. Top of the Class

With a diploma often comes a monthly payment. Getting rid of that student loan as quickly as possible is tempting, but take a close look at the interest rate. You might be best served by paying extra on a higher-rate loan or taking full advantage of your company’s 401(k) match before tackling student debt.

6. Feeling at Home

The idea behind a mortgage is that by paying for a house over several decades, the home will appreciate and increase in value throughout your lifetime. So consider the future when house hunting. Start by researching locations with good schools. A strong school district often means an increased home value.

7. Junk Mail

Nix the temptation to spend. Made possible by the Fair Credit Reporting Act (FCRA), OptOutPreScreen.com allows you to remove your name from mailing lists used by creditors to make offers. Opting out prevents consumer credit reporting companies from providing your information to creditors.

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Article written by Kasee Baldwin Bailey

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