Debt Management v. Debt Reduction

For many personal finance professionals and others besides, there is no difference between debt management and debt reduction. Indeed, many of them will tell you that debt management is the best way to reduce debt. However, I am of the opinion that there are important differences between debt management and debt reduction.

Debt management

In my book, debt management is just that: managing debt. It is more about treading water and keeping debt from consuming you. It is not exactly purely passive, but nor is it an active solution to debt. And while debt management can, in fact, reduce debt, it does so at a rather slow pace. And it looks a lot like managing rather than reducing. You shift your debt from one place another as you slowly chip away at it.

Debt reduction

I view debt reduction as something more active than debt management. Debt reduction is about making a choice to get out of debt as quickly as possible. This means reasonably and honestly looking at what lifestyle changes you can make in order to put more toward actively reducing your outstanding debt. Rather than simply moving your debt around and slowly reducing it, you attack each debt one at a time and reduce it aggressively.

While debt reduction can be more difficult that debt management, in the long run it is more rewarding. You will ultimately pay less in interest charges, and you will see quicker and more dramatic results in the improvement of your FICO score.


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