Mention the word debt and it evokes in people a kaleidoscope of emotions. You will agree with me that the feeling of being indebted is not a pleasant one. In fact, being deep in debt not only hurts our pride but also our self-esteem. We are constantly stressed, lack peace of mind and always wondering what will happen with the skyrocketing interest rates. The one million dollar question to all those who have little or huge debts is: how does one manage debt? What are some of the effective ways that a person can utilize to manage their debt?
Know the people you owe and the amount of money you owe them
When it comes to debt, burying your head in the sand is not the solution. Getting out of debt requires that you become proactive and deal with your situation head on. As such, it’s important that you make a list of the people or institutions as well how much you owe each and every single one of them. Tally the total amount of debt, due dates for each, and the total monthly repayments you are supposed to make. You can only come up with an effective repayment plan if you understand who you owe and how much you owe them.
Ensure you make timely monthly repayments
Once you have a clear picture of the people you owe and the amount of money owed to them, the next step is to ensure that you make monthly repayments on time. We both know that late repayments attract interest rates which in turn make it very difficult for you to get out of the debt rut. You can make use of a bill payment calendar to ensure that you make your payments on time and when you receive your paycheck. Do not forget to adjust your debts as you continue making repayments.
Make efforts to at least pay the minimum payment
While paying more makes you offset your debt faster, sometimes you are simply not in a position. In such a situation, it’s always imperative to ensure that you pay the minimum payment required of you. The merit of this is that it keeps your debt from growing and therefore saves you immense stress.
Make a decision on which debts you should pay off first
Whether you like it or not, the truth of the matter is that your debts attract different interest rates. You should always purpose to pay off debts that attract high interest rates. Credit card debts with high interest rates should be your first priority when repaying debt as they are instrumental in ensuring that your debt does not grow to untenable levels. Alternatively, you can also pay off debts with lowest balances.
Make it a plan to draw a budget and plan on your monthly expenses
A popular adage has it that failure to plan is planning to fail. On the same note, ensure that you have a proper plan of your monthly expenses and whether your income can meet those expenses. A budget gives you an idea of how you can effectively use your income, make payments for recurring monthly bills and how to use any extra cash you have after meeting all your expenses. If you notice that you have extra cash from your budget, you can use the same to offset your debt faster.
In conclusion, effective management of debt is the first step towards leading a debt free life. While we all have some kind of debt one way or the other, how we manage the debt determines how stressful or stress free our life becomes. Always purpose to ensure that your debt doesn’t spiral out of control.