Every one of us is looking forward to a brighter future ahead. We dream of having a lot of investments, from vehicles, to properties and businesses to make our finances more stable. We dream of saving for retirement, if we can retire from work earlier, the better. But while we have all these things inside our mind, we must also deal with one of our biggest responsibilities in life – our debts. Debt management is essential to everyone, even those with a little debt. If your debt is just a little amount, you have to keep up your payments so it doesn’t get out of control. Meanwhile, a large amount of debt needs more effort to pay off while also preparing and planning for your tomorrow.
So how do we really tackle debt while we are planning for our future? Here are a few tips.
First, you must know how much you really owe, up to the last cent. To start with, you can make a list of all your debts. Don’t forget to add in your list the following : total amount of the debt, the creditor or lender, interest rate, monthly payment, and due date. This way, you’ll see the bigger picture and stay aware of your complete debt picture. Check to your debt list periodically and update it monthly or whenever there are changes, like the total amount which decreases every time you pay.
Second, you must pay Your Bills on Time Each Month. Late payments make it harder to pay off your debt since you’ll have to pay a fee for missing every payment. Avoid missing two payments in a row as it increase the interest rate and finance charges.
You can use your computer or smartphone to set an alert to remind you several days before your payment is due. If you miss a payment, don’t wait until the next due date to send your payment, send your payment as soon as you remember that it was missed instead.
Third, make at Least the Minimum payment. Not all people with debt can afford to pay more, but they can at least make the minimum payment. Although the minimum payment doesn’t help you make real progress in paying off your debt, it keeps your account in good standing. Plus you avoid penalties for late payments.
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Fourth, while you’re working on paying down debt, stop applying for more debts. Also, try to avoid using your credit cards and start carrying cash instead. If possible, cancel all your credit cards for the mean time.
Fifth, plan or make a budget that can help you stay out of debt and can help you climb out and climb up. Your budget must show how much money you earn monthly – from your job, business, side hustles, investments, all possible sources of income – and where that money goes. To pay off your debt as quickly as possible, you have to sacrifice and set aside a lot of things. For your budget plan to be effective, make sure to stick to it.
Lastly, build an emergency fund. Saving for emergency is your Fall Back when things get rough. This way, you don’t have to go into another debt for emergencies or crisis in your life. You can start by creating a small emergency fund, then every month of every quarter, make it your goal to create a bigger fund. It will eventually build up and grow so you can achieve the standard emergency fund which is at least 3 or 6 months of your living expenses.
If a lot of things go out of control and you think you can no longer handle your debts, consider asking for help from professionals.