Having a strong financial strategy can be an important tool for many individuals, but mounting issues such as debt can make keeping such a plan a bit more difficult.
Having too much debt can be quite restrictive on a number of plans related to a person’s financial future, and some Americans are struggling to cope. According to a report from the National Foundation for Credit Counseling, more than 35 percent of individuals are embarrassed to admit that they had credit card debt. Another 30 percent noted that their credit score was too shameful to bring up to anyone.
“Since consumers revealed that the two facts they’d be most embarrassed to admit are related to credit, it is obvious that they are not comfortable with how they are currently managing their money,” said Gail Cunningham, spokesperson for the NFCC. “The good news is that there are solutions available for those who want to take charge of their financial future.”
With this in mind, it may be a good idea for some to get a better understanding of how to manage debt correctly.
Good debt exists
While many Americans may want to not have any type of debt at all, it is important to know that there are some options that could have a beneficial effect, if managed correctly. A report from CNN Money noted that good debt includes paying for items that are necessary for the person’s life that they cannot afford to pay off in one, immediate payment.
This, of course, is different from frivolous purchases. The news source explained that any purchases that are not able to be paid up front and are not vital to living comfortably would fit into this category. Additionally, any debt paid on credit cards can be included in this group due to the high cost of paying it back.
Manage existing debt
Most people have some level of debt, and there may be a mix of healthy and unhealthy debt in that category. ConsolidatedCredit.org suggested that individuals may want to keep their debt levels to 36 percent of their total income in order to lead a healthy personal finance situation. Additionally, it is important to keep credit card debt payments to no more than 15 percent of the earnings that a person gets over the course of a month.