So you’ve been going through the arduous task of managing your debt every month and still feel like you’re going nowhere with it. Managing your debt can be an overwhelming task leaving you stressed and distracted. Fortunately, there are many ways to recover from your outstanding debts.
Here are five simple pointers that may help you pay off and manage debts effectively.
- Assess and understand your financial situation.
The very first step that you need to take in order to properly manage your debts is to fully analyse your situation. Determine how much debt you actually have. You can use tools or worksheets such as this in order to make this task easier.
Determine the value of your current assets, how much you earn, and how much you spend. Once you have a clear understanding of your financial situation, you can then work out a budget as well as a payment plan. It will be easier to see the whole picture if you have the value of your debts, the value of your assets, and your budget in one organized record. Remember to include a timeline showing the important dates such as the dates you opened your accounts, and the terms of the loans.
- Prioritise your debt payments.
Make use of the organised record of your debts, and find out which ones have the higher interest rates. Usually, credit cards have higher rates than bank loans. Try to pay off the most expensive debts first. However, you also have to pay attention to the smaller debts, and pay them off before they become too unmanageable.
- Pay more than the minimum.
Break the habit of paying only the minimum amount of installment every month. Of course, this can be quite challenging especially if you already have a large amount of installment already. You may have to carefully examine your budget, and cut down on some expenses. Try to eat at home more often, instead of going out to expensive restaurants. Skip out on happy hours during the weekends. Limit your shopping sprees.
The sacrifice can be well worth it. By paying more than the minimum, you can clear your debt faster, and pay less interest over time. The extra dollars that you put into your monthly installments can help you save hundreds, or even thousands on interests.
- Use your savings to reduce your debt.
The interest rate of your debt is most likely a lot higher than the interest rate on your savings account. As such, it may be wise to cash out your savings, and use it to reduce the amount that you owe. If you can clear out your debts with the highest interest rates using your savings, then do not hesitate to do it.
- Remember to live below your means.
To live below your means, you have to spend less than earn. If you find out that your expenditures are greater than your income, immediately look for ways to cut down your expenses. Until you are out of debt, cancel unnecessary expenses such as magazine subscriptions, expensive fashion items, luxury items and the likes.
Save your money for basic needs such as healthy food and versatile clothing as well as tuition fees and housing.
Here are more resources on how to manage debts better.Recommend0 recommendationsPublished in