6 Best Tips to Manage Your Debt

6 Best Tips to Manage Your Debt

Debt is one of the most common terms when it comes to personal finance. It is something that a lot of people tussle with. Of course, being in debt can be quite an overwhelming experience. A survey done in 2018 indicates that combined credit card debt that’s owned by Americans is more than $1 trillion. 

Unfortunately, spending your life in debts can affect you financially, and it can have an impact on your financial goals. Moreover, if you don’t manage your debt appropriately, it can ruin your credit score. Nonetheless, there are ways that you can manage your debts. Other than consolidating your debt to lower your interest rates, there are other different ways that you can control your debt. They include:

1. Know Your Creditors and How Much Debt You Owe Them

The best way to know how much you owe is to prepare a list of all debts, comprising of the amount, how much you should pay per month, and the due date. If you know all your debts upfront, it will be easier for you to pay them off completely. Don’t create the list and leave there, make sure that you refer to it regularly, especially if you are paying bills. Update the list every month as the debt continues to decrease.

2. Ensure That You Pay Your Bills on Time Every Month

Late payment can make it difficult for you to pay off your debt because you will pay a penalty fee for every payment you don’t make on time. And let’s say, if you miss three payments consecutively, the interest rate and penalties will increase. If you are using an app to monitor your payments on your Smartphone, enter your payments on it and set the alarm to remind you a few days before your payment schedule. In case you miss your payment, you shouldn’t wait for the next due date to pay off, just make payment immediately so that you can avoid your name from being reported to a credit bureau. 

3. Have a Monthly Bill Payment Calendar

A bill payment calendar can help you determine bills to pay with your various paychecks. On the calendar, include each bill next to the due date. Then you can fill in the amount of each bill. If your paychecks fall on different days, you can create a new calendar for every month, but if you get paid on similar days, you can use the same calendar.

4. Make Minimum Payments Every Month

The moment you have borrowed any money, you are obligated to repay it according to the agreement with your lender. In most cases, you will pay the minimum monthly payments that you are required to make. If you fail to pay the minimum, your creditor will charge you a late fee. And if you fail to pay it after 30 days or more, your creditor is likely to report your late payment to a credit bureau. This will affect your credit score. You may also get into default that can trigger a lawsuit, home foreclosure, or repossession of the car.

The best thing is to automate your payments so that your payment for the day is deposited directly from your paycheck. Just do your math and see whether you will have enough money to sustain you and cover your bills.

5. Decide on Which Debt to Pay Off First

The best strategy to pay off debt is to pay off your credit card debt first since their interest rates are higher than other types of debts. You can prioritize paying off your credit card debt with the highest rate. You can use your debit list to know which debt should come first when making payments. You can also opt to pay off the debt with the lowest balance first.  

6. Get Help if You Find it Hard Making Payments

Making payments can be hard sometimes, especially if you don’t have the money to pay on time. If this happens, then you need to take quick action. You can talk to your creditors to give you options that are available. Your options will depend on the type of loans you have. If you have student loans, you are likely to qualify for deferment. There are debt relief companies that can help you if you are struggling to pay off debt. Be sure to do extensive research on them because some of them are scams. You can check the Better Business Bureau to see the genuine ones.