It’s a scary feeling when your financial affairs are out of control. Perhaps your debts are spiraling, you’re struggling to make your minimum payments, and things are going from bad to worse.
Learning to manage your debts is one of the most important things you can do to get your finances in order. Read on for our top tips on how to make a debt plan that will help you get things back under control.
You can’t make a financial plan unless you know exactly what’s going on. It might make you feel a bit anxious to put things down on paper, but you have to grit your teeth and do it.
Make a list of all your outstanding debts. You should include the minimum payments, total debt to be paid, and the interest rates.
This way, you can figure out which ones to prioritize. It makes sense to pay off the ones with higher interest rates first.
Know the Score
It’s a good idea to regularly check on your credit score. Check that it’s accurate and there aren’t any accounts showing up that aren’t in your name which could be fraudulent.
You’ll also identify areas where you could improve. If you always pay on time and pay more than the minimum payments due, this can help to improve your credit score.
Make a Budget
One of the most important elements of debt management is making sure that you don’t get into more debt. The only way to do this is to reduce your outgoings so that they are less than your expenditure.
By making a budget and working out exactly what you need to pay out every month, you can then identify if there are some areas where you could reduce your spending. Every cent counts and if you can pay off a little more on your debts each month rather than getting that extra takeout, you’ll be debt-free sooner.
Build an Emergency Fund
It’s really important to work towards having a small savings pot available for emergencies. Without this, unexpected expenditure will always push you into debt. There’ll always be car repairs and boiler breakdowns to pay for, so it’s best to be prepared.
Even a small fund is better than nothing. It’s a good idea to put something aside each month towards this fund, even when you’re still paying off debts. It might seem counterintuitive to be saving rather than making extra payments, but it’s a key strategy in reducing further debt.
Recognize When You Need Help
Sometimes, things just get completely out of control. If you’re struggling to pay the bills each month and make your minimum payments, it might be time to consider a debt management plan.
Consolidating your debt can reduce interest rates and also decrease monthly payments to help you pay off your debt sooner. There’s no shame in asking for help if you can’t manage things by yourself. Specialist advice really can help.
Use These Easy Steps to Manage Your Debt
Even when things seem unmanageable, there’s always hope! Following our steps to manage your debt will help you feel happier and more in control of your life and your finances.
For more great content on personal finances, don’t hesitate to check out the rest of the blog.