Debt management is key in having control over unsettled finances. It helps a person be in charge of his debts and be able to pay it off.
If done properly, debt management can be an essential tool for you to keep track of your debts. Here are steps to get you started:
MAKE A LIST OF YOUR DEBTS
The most basic and easiest thing you can do to manage your debt is to make a list of your debts. The list must include the total amount of your debt, creditor, monthly payment as well as the due date. This list will be useful in confirming your debt for you to know who to pay your bills. You can also refer to this review for additional help. The debts review should be updated from time to time as you make progress.
PRIORITIZE DEBTS TO PAY OFF
After making a list of your debts including the creditor, amount of debt to be paid and the due date, you need to identify which debt to pay first. Normally, the debt which bears the highest interest must be prioritized first to avoid any additional costs. Through your debts list, determine which of them should get the highest priority. You may rank them according to your preference. Once you’ve done that, managing your debt will be a lot easier.
CREATE A MONTHLY BUDGET PLAN
Creating a monthly budget plan must also be done to manage your debt. A plan helps you ensure that your money will be sufficient for all of the expenses for each of the month. Types of expenses vary from person to person and so your monthly budget plan will solely be based on you.
If you have this, you will be able to avoid spending your money on unnecessary things. It will also be useful when you think your budget will not be enough for the current and coming months thus, giving you a lot of time to prepare for a backup plan. Eventually, if you use it effectively, all of the extra money left will go to your debt payments.
NEVER MISS THE DUE DATE
Some of us tend to miss deadlines for debts especially if we can’t pay it off on or before the deadline. However, this can be avoided by practicing yourself to pay off debts on time and making sure you don’t miss the deadline. You can do it by reminding yourself through a calendar system on your phone or computer by setting up a reminder days before the due date. If you really cannot avoid missing it, don’t wait for the next due date to make payments. Always make your payments as soon as possible, so you don’t have to pay a late fee.
OPT FOR A MINIMUM PAYMENT
You don’t always have to pay for the total amount of your debt. Sometimes, opting for a minimum payment is fine. You can do so by paying a portion of your total debt amount. Even just a little of it can help. Of course, this will not make a huge difference, but it can surely help you pay little by little until you’re able to pay the full amount of your debt. Also, bear in mind that it will be even more difficult if you miss payments resulting to a default account.
PREPARE AN EMERGENCY FUND
An emergency fund is a lot important than what you think it is. It helps you cover for expenses when your cash flow falls short. Start by saving up money from small amount until you reach the ideal amount for an emergency fund like going from $500 to $1,000. Backup funds will keep you from having more debts.
Managing your debt is something that must be given enough attention. No matter the debt size, it is important that you can manage them appropriately so you will not end up with having more debts in the future.