How To Keep Debt Manageable

How to Keep Debt Manageable

We live in a consumerist society. Television alerts us to the latest "must-have" gadgets. It is tempting to just buy now and pay later. Most of us have credit cards, so this is easy to do. Being indebted is the norm in western society, but it is important to not let this debt get out of control. A few helpful pointers will help one avoid the need for debt collection.
Debt Is Sometimes Necessary
In an ideal world, people would not need to go into debt. Indeed disciplined saving can allow consumers to buy products immediately, and out of their own means. Unfortunately, most people would spend the best part of a lifetime trying to save up to purchase a property outright. Unexpected expenses, like a costly, but necessary car repair or replacement may leave debt as the only option to fill this need.
Level Of Debt
People need a house to live in, and often need a car to get to work. It's important to remember that this car doesn't need to be the latest, smartest model, and the house doesn't need to be in a prime area. While these options are nice, they are just that - options. If one has to stretch one's means to the limit, and go deeply into debt, then such decisions should be reconsidered.
Maintain A Buffer
When considering major purchases that require going into debt, sit down and calculate what is affordable, after all other expenses have been considered. You might consider this affordable today, but if one's financial situation took a turn for the worse, it may no longer be affordable. It is therefore important to give oneself a healthy buffer. One should not lose any sleep over a debt if it can easily be serviced. If one is losing sleep from the outset, then what will happen if things deteriorate? 
Expect Interest Rates to Rise
It is foolish to expect interest rates to remain constant. Factor in potential repayments where rates are a few percentage points above current rates, before taking on any new debt.
Lock in to Fixed Rates At Appropriate Times
On major loans, like home mortgages, it is worth considering fixing home loan rates when it is advantageous (ideally when fixed rates are lower than longer term averages). If one cannot service a somewhat higher loan repayment, then this might be one's only option. Be aware that fixed rates are often much higher than variable interest rates, as they anticipate future rate rises. The consumer needs to decide roughly how much rates might rise, in deciding whether a fixed rate is worthwhile.
Use Windfalls to Pay Down Debt
When an opportunity arises to reduce one's indebtedness, one should seriously consider it. Windfalls like an inheritance, work bonus or payout are prime examples. It is tempting to use such proceeds on a splurge, but using at least some of these funds to reduce existing debt will free up future earnings for other options.
Pay all Debts on Time
Once debts start to get unmanageable, they can quickly spiral out of control. Late payment fees further increase indebtedness, and make loans even harder to service. It is therefore worthwhile getting into good habits early. Paying debts on time will keep interest payments low, or maybe even non-existent in the case of interest free periods for credit cards.
Availability of credit does provide some wonderful advantages to consumers. One must remember that poor management of credit will make it harder to come by in future, and may lead to debt recovery of existing debts. Use credit wisely, and one should be able to keep it at a manageable level.