 TITLE: Knowing What Debts to Avoid When Managing Your Finances CONTENT: How to Deal With Bad Debt\n-------------------------\nNow that you know all the problems bad debt can cause, what can you do if you've already got bad debt? Depending on your situation, one of these two approaches may work for you.\n*   **Consolidate your debt.** If you have high interest debt or have so many different debt payments that it's hard to keep track of them all, debt consolidation might be for you. Combining different debt accounts into one monthly payment at a lower interest rate can make it easier to repay your debts.  \n    There are several ways to consolidate debt. You can use a balance transfer credit card that offers a 0% introductory annual percentage rate (APR), get a personal loan or debt consolidation loan, borrow from your home's value using a home equity line of credit or pull money from your retirement account. Each of these options has risks, so be sure you understand what you're getting into.\n*   **Make a budget.** Poor money management often leads to bad debt, and taking charge of your finances can help you get out of it. To start eliminating bad debt, set a budget that takes into account your income and expenses. You have options when it comes to setting a budget. One common approach, the 50\/30\/20 method, is to put 50% of your income toward essentials (rent, groceries and car payments), 30% toward discretionary spending (eating out or new clothes) and 20% toward financial goals such as saving and paying down debt.  \n    Tracking your spending will help you set a budget and also reveal where your money really goes. If you're surprised to see how much you're spending on eating out or retail therapy, don't beat yourself up—just redirect that money toward reducing your debt. Setting and following a realistic budget will help you make steady progress toward your goals without getting discouraged. END