Debt Management

Debt management 101 is all about helping you with your finances. One of the hardest part about finances is managing debt. Most people struggle with this. Personal finance is something that you have to work at and continue to learn. That is what this article is about.

A great place to start is defining debt. If we are going to learn about how to manage bills and debt, we need to know exactly what it is.

Debt is money that is owed to someone else for a service or asset.

Services can be things like your cell phone service or your electric bill. We will go a little more in-depth about assets later.

Next, I am going to give you some tips on how to manage your debt through knowledge.


The first thing that makes up personal finance is called income (Earnings). Earnings are the cash that may be flowing into your bank account from an outside source. Employment, business, retirement accounts, dividends, money from Aunt Sally are typical types of income. Earnings are what a persons earns from somewhere else.

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When you go about your daily activities, you buy things and use services. Those things are called expenses. Money that flows from your bank account to an outside source to pay for a debt is considered a cost. Expenses come from bills, store card payments, buying food, purchasing gas, renting a car, going on vacation, etc. Whenever your money flows to an alternative person’s or companies coffer, it is deemed an expense.

Income Statement

Once you combine Income and expenses, you’ll get what is known as an income statement. An income statement simply tells you what money that you are earning minus the money you happen to be losing in expenses. After subtracting the two, it teaches you what money is left at the end within the specified period which the information was gathered.

The income statement only tells the amount of money is flowing out and in of accounts and to what it’s flowing to.


Your next set of definitions explains ownership. Assets are valuables that keep up a level of monetary worth. A home is considered an asset. Some old baseball cards from the attic which can be worth money are an asset. An asset might be a movie collection or simply someones car. Basically, something that you can sell to another person to get a profit is considered an asset.


The fourth term to master is liabilities. Liabilities are long-term debts which are carried by people or businesses. If something is purchased on credit or by loan, those instruments are liabilities. Each time a person has debts or has taken out a car loan, that debt is usually a liability.

Balance Sheet

When assets and liabilities are subtracted from each other a number is found, that document is termed a balance sheet. The number which is left over at the conclusion, whether it be good or bad, is called a persons net worth.

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When trying to understand the basic principles of personal finance, the main elements again are income, expense, assets, and liabilities. Once you place them together you receive an income statement plus a balance sheet. It is the basic level of personal finance that everyone must learn to manage their books.

Now that you know these terms, you take them and put them together to track your expenses. Tracking your expenses and keeping and balance sheet and income statement will allow you to better understand where your money is going.


Once you know that, you can stop spending money in places you shouldn't and start spending money to pay off your debt.

But more importantly, using these tools will help you manage your debt by keeping you up to date on where your money is going. If you are over spending, you will be able to make the adjustments needed to fix it.

I hope that this helps. I know it helped me. Good luck.