It is no secret that consumer debt is a significant problem in the U.S. Its total stood at a staggering $2,400 billion in 2010, meaning that the average U.S. citizen was encumbered with around $7,800 worth of debt across a plethora of loans, credit cards and financing agreements. Although 2011 has seen a slight improvement and witnessed the rate of household income spent on debt services fall from 13% to 11%, the good citizens of America are still investing vast sums of money into outsourcing the management of their debt. However, the question is whether this is money well spent or simply a case of throwing good money after bad? (For related reading, see 7 Tips For The Do-It-Yourself Debt Manager.)

TUTORIAL: Credit And Debt Management

Debt Consolidation
Debt consolidation is often presented as the answer to consumers' prayers, and something that can ease the burden of multiple debts and leave you with just a single monthly repayment to consider. While there are some merits to its purpose, it is a paid service that does not significantly reduce the level of your existing debt. While a debt consolidation company may negotiate with creditors to freeze or reduce interest payments there is no guarantee that they will be successful, and your monthly repayments to them will also include administration and service charges.

Debt consolidation companies base their services around easing the consumer's stress when it comes to managing financial liability. However, they do not achieve this by employing any practice that you could not implement yourself if you put your mind to it. Calculating your levels of income and overall expenditure is a practice that would be a good habit to get into anyway, while negotiating with creditors over interest rates and monthly repayments is as simple as picking up a telephone and being honest about your financial predicament.

Seek Out Free Advice
Commercial debt management companies offer several paid services to consumers, which can include everything from consolidation loans to debt counseling and the management of existing liabilities. When it comes to seeking out relevant financial advice and taking control of your debts, however, a for-profit commercial organization is the very last place you should visit. There are a number of free debt advice services that can help you to address your creditors and create a viable management program. is an example of a free and impartial online resource that responds to queries about your existing debts and assesses any debt consolidation programs you are already affiliated with. Resources like this even provide free online debt management and budgeting tools, so that you may approach your financial liabilities with a suitable level of legal knowledge and a plan of action to reduce them. By sourcing free and impartial advice, you will save yourself potentially thousands of dollars in the long term. (To learn more, check out Expert Tips For Cutting Credit Card Debt.)

Becoming Debt Free Is One Thing, Remaining So Is Another
The issue with debt consolidation and management solutions is that while they can shine like beacons in a financial haze, they are often costly and short-sighted solutions to what has become a huge cultural problem. Undertaking a debt consolidation loan simply opens another line of credit, which does little or nothing to tackle low household income or the spending habits that caused the issue in the first instance. The key to long-term debt resolution lies in your own self discipline and understanding of finances, and not the capacity to invest in short term solutions.

Budgeting and creating a big picture of your monthly incomings and outgoings is a good place to start, and should help to reveal several key areas for improvement. Most debt starts with an imbalance between what you earn and what you spend, and bridging this gap involves having a disciplined attitude to expenditure and refraining from impulse buying. By paying attention to these fundamental principles of solvency and maintaining frank and honest communication with creditors, not only can your debt be reduced but you can also lay the foundations for best financial practice. (To learn more, read Budgeting Basics.)

The Bottom Line
Remember that debt management companies often promise the world, but at best they deliver a costly service that replicates many of the practices that you can do yourself for free. If you are unsure about how to tackle your debt liability, start by seeking free advice from a government based nonprofit organization. This is the first step towards reducing personal debt and changing your financial behavior, and learning the key skills required for staying in the black in 2012. (For related reading, see 3 Alternative Budgeting Styles: Which One Suits You?.)

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