Understanding why you are in debt is the first step you can take to getting out of it. And getting out of debt might just be key to avoiding a lot of things, such as undue stress and bankruptcy. Here are some tips to managing your debt.

Take a Look at the Facts

There’s no doubt that Americans are loaded with credit-card debt. In fact, the average U.S. household has nearly $15,950 in credit-card debt. And the average interest rate runs in the mid- to high teens.

Good Debt and Bad Debt

There is “good debt,” such as for a home or college education. You just need to make sure you don’t borrow more than you can afford to pay back. It’s also important that you shop around for the best interest rates. While there’s “good debt,” there’s also “bad debt.” This bad debt is stuff you consume quickly – like meals and vacations – another way of looking at it is debt that you can’t afford to fully pay off within a month or two. A way to get around this is to set aside some cash every month, so that these become affordable. If there’s something you really want – save for it.

Be Aware of Your Spending

Some people just go out and buy, buy, buy, without ever putting thought into what they are buying. Keeping a list of the things you purchase can help this – it forces you to take a look at what you do and don’t need.

Higher Interest Rates First

The first step to consolidation is paying down your debts that have the highest interest rates first. Once the highest is taken care of, move onto the next one. If you’re able to – pay more than the minimum on these cards so that you can really clear them.

Get Help

If you have more debt than you can manage you might want to consider contacting a reputable debt counseling agency to help consolidate your debt.