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Ten financial tips for 2010: tip #1 debt comprehension

Check back often for other financial tips for 2010!
Check back often for other financial tips for 2010!
Photo by Jane M Sawyer

Do you know how much you have in total debt? The first financial tip for 2010 is to make a list of your debts and add up the amounts. You may be surprised. Understanding the total amount of debt you owe is important because it gives you a clear goal. Of course your goal should be to eliminate all debt, beginning with revolving accounts. The acquisition of debt prevents us from being able to achieve financial goals. We live in a society where we are bombarded daily by requests to take on more debt. We should avoid the temptation to purchase goods and services which we cannot afford. Understanding how much debt we already have will help us in this endeavor.

As you build your list of current debt create two categories. The first category should be 'revolving accounts' such as credit card debt. The other category should be things like a home mortgage or a car payment. These are debts with a standard monthly payment and a set payoff date.

Total the amounts of both categories and then add them together. This is your total debt. The reason I suggest separating your debt into the two categories mentioned above is because they are different beasts. Revolving accounts should be paid off in full immediately (and the accounts closed in my opinion). The other debts, such as a home mortgage, can meanwhile be paid on its regular monthly schedule.

For many Americans debt is numero uno when it comes to obstacles which stand in the way of our dreams. So let's figure out how much debt we have first. Later we'll be discussing methods to eliminate your debt as quickly as possible.