Managing Your Debt – More than a Juggling Act

Managing your debt.

One of the big issues facing both families and small business is debt as a result of our recent financial sector crisis. As we continue to explore how we could assure our financial health,  remains in the forefront.  Credit card debt, home mortgage, car loan, educational loan and various other financial obligations have become very much a part of our life and we need to start dealing with them before we can become financially healthy.

Managing debt therefore requires the following coordinated steps:

  • Make a list of all your debt including the interest rate and payment schedule and then rank it from the highest interest rate debt to the lowest
  • Prioritize Your Debt: Focus on eliminating highest interest rate debt first while making the minimum payments on all other debt, thus putting into action Debt Snowball Method for prioritizing
  • Consolidate Your Debt: Consolidation can reduce the loan interest rate and therefore the monthly payment
  • Gradually Eliminate Your Debt:  Make your financial plan, stay away from additional borrowing, control your expenses, and execute your consolidated debt settlement priority plan


While working through the above noted 4 steps illustrated via video links, also keep in mind that it is equally important to protect the value of your assets that underlie your debt.  If you do not maintain your car or home adequately, while you pay off your debt, your asset purchased via debt begins losing value making you asset poor and cash poor.  Cash poor because you are pending cash to pay off debt and asset poor because the underlying asset is deteriorating in value faster than its natural phase resulting from neglect or lack of effective maintenance. 


Our homes are our single largest investment and therefore we must protect its value.  Understanding the various ways a home loses value is therefore very critical and realizing sometimes they are not directly visible is equally important. Some ways a home value decreases are:

  • Not maintaining proper up keep, maintenance and repair causes structural decline – remedied by effective upkeep
  • Deteriorating public school districts cause community degradation driven value decline – remedied by insuring proper funding of the school district to maintain adequate educational standards
  • Deteriorating public safety resulting in higher crime and hazards leading to safety concerns and rise in home owner’s insurance cost in the face of declining home value - remedied by insuring proper funding of the fire and police departments insuring security and quality of life which in tandem leads to appreciation of home value and reduction of home owner’s insurance costs

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Janet Marie Rabig February 16, 2012 at 01:21 PM
the debt snowball actually teaches to pay off lower balances first then put more toward paying off the higher ones.
Dr.Kas - Tips for Financial Health February 16, 2012 at 06:53 PM
You are right in that Snow Ball Method for Debt Payment is currently being used to pay lower interest debt, but the methodology itself denotes starting with one and moving forward. Therefore it becomes more effective to pay off largest interest loans first so that over the life of all the loans a household or small business ends up paying less overall debt financing costs. The goal here is to pay less interest and use the savings for other useful purposes. Big businesses do this to improve their financial health; so why not encourage the same techniques for the rest of the population? That was where I was coming from when writing this blog. Hope this clarifies the matter Janet and thank you for posting your comment thus giving me the opportunity to expand on the concept!
Janet Marie Rabig February 16, 2012 at 07:00 PM
No, what I was saying, having done the Dave Ramsey Financial Peace series is that he teaches that the debt snowball is to pay HIGHER BALANCES first and know out some of the hindering small debts then concentrate on paying things off by interest rate. Most of the time you can get your rates lowered significantly by making arrangements with the companies. I don't completely agree that what big businesses do can apply fully to what we do with our personal finances. I thank you for your post.


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