Last Updated on May 21, 2021 by MoneyVisual
Managing debt can seem a lot more intimidating and complicated than it necessarily is. While many people are under the impression it takes a few master’s degrees and 20 years of experience in a top finance company to get a firm grasp on your personal finances.
The truth is that, by following a few simple tips and having a trustworthy financial advisor, you can typically avoid falling into serious debt and create a stable financial foundation for you and your family. All it takes is a few strategies and skills and you will be well on your way to a life full of financial wealth, health, and happiness.
Tip No. 1: Track All of Your Financial Moves to Manage Debt
If you are currently in debt or are worried that you will be if you don’t come up with a plan soon, do not fret. The best place to begin your journey in debt management is simple: Track your financials. This can be as easy as looking at your bank and credit card statements from the past three to six months and looking at where you are spending all of your money.
Pay special attention to what you are spending on bills, loans, grocery shopping, eating out, recreational activities, and travel. This will give you a good idea what where the majority of your income is going so you can go about creating a budget.
Tip No. 2: Set a Clear and Realistic Budget to Manage Debt
Every budget should begin with your essentials — rent, utility bills, car, and insurance payments, automobile costs, and any other living expenses that have to be paid every month. From there, you can determine what you want to spend on secondary essentials, such as groceries and self-care items, like toothpaste, vitamins, gym memberships, or anything of the like.
After all of your essentials are checked off, you can determine how much of the remaining income you want to keep in savings and use on any additional activities, such as entertainment or memberships.
Tip No. 3: Pay Bills on Time, Every Time
As long as you prioritize paying your bills within your budget, you should be well on your way to getting and staying out of debt. Late and missed payments can result in high interest being added to the total amount that you owe for your credit cards and loans, which can greatly increase your total amount of debt. The best way to avoid this is by creating a calendar with all of your due dates and paydays so you can figure out the best time to pay your bills on time and prevent living paycheck to paycheck every week.
Tip No. 4: Make More than You Spend
It’s not uncommon to not make enough money every month to effectively get out of debt. While it will certainly be difficult, the best way to get out of that situation is to do everything you can to earn some extra money.
Consider using public transportation instead of driving, eating out less, getting a second job, selling old clothes and items in your home, switching to energy-efficient light bulbs and appliances, or even cutting back on coffee runs in the morning.
Numerous small changes to save a few dollars can quickly add up to hundreds of dollars. The key to managing debt is making more than you spend and allocating as much money as possible to your outstanding balances.
Tip No. 5: Set Out to Save
One of the most important and often overlooked parts about manage debt is saving money every month. While you should not allocate hundreds towards a savings account every month if you are in the mountains of debt, you should do your best to set up a gradual backup fund for yourself. This will help make sure that you do not go back into debt in the future from a large unforeseen expense, such as a medical emergency.
Tip No. 6: Don’t Be Afraid of Assistance
Sometimes, the best way to manage debt is to ask for help. Not everyone can easily do it on their own and there is no shame in getting help from a loved one or even an expert who has years of effective experience. With millions of people going through similar financial struggles every year, there is always someone out there who can help you plan your financial future and set you on the right path toward getting out of debt as quickly and effectively as possible.
Tip No. 7: Choose a Method to Get Out of Debt
If one of your primary goals is to pay off the debts you currently owe, it is time to pick a plan. Some people prefer to order their debts from least owed to most, and pay off the lowest first. Others like to order their debts in interest rates and pay them off in order of highest interest rate to the lowest interest rate.
Yet others prefer making lower payments to all of the debts at once. Whichever solution you choose, the important thing is to never forego making a payment to one account so that you can afford a higher payment to another. The best way to get out of debt is to simply put more money in your budget towards your balances. Choose a specific plan that works for you and encourages you to keep making your payments and you will be well on your way to achieving financial success.
Create a Strategy for Success and Manage Debt
By following these tips, you are sure to be on your way to getting some debt relief and setting up a more positive future for you and your loved ones. Whether you are drowning in several thousands of dollars in debt or only a few hundred, the right combination of time, patience and planning will help you get to where you need to be with your personal finances.
Katie Tejada is a writer, editor, and former HR professional. She often covers developments in HR, finance, business communication, recruiting, and CRM solutions, but also enjoys writing about events, decorating trends, and travel.