8 steps to manage debt of any size

Everyone, even those of us with the smallest of debts, will need to manage our finances.

Keeping up with your payments and ensuring they don’t get out of hand is extremely important, but what if you’re juggling through a large amount of debt? Would you still be able to manage it?

In an article published by The Balance, here are 8 steps to managing debt of any size:

1. List your debt

Knowing how much you owe and to whom you are paying is going to make it easier and clearer for you by listing them. Your debt list is essential, especially when you have bills to pay. By updating your list regularly, it’ll help you keep track of the exact amount of your current debt.

2. Know your priorities

Having a debt list and knowing which to pay off first will benefit you in the long run. As we all know, credit cards have high interest rates and if you do not pay on time, there will be a penalty fee and it’s going to cost you more money. Break down your debts and prioritise paying off the one with the highest interest rate. Once you’ve settled that, direct the full amount to the next debt. This will give you a clear overview of the outstanding amount you have left.

3. Pay off collections and charge-offs

While it’s understandable you are unable to pay more than you can afford to clear your debts, always focus on keeping your accounts in good standing. Pay off those past due accounts whenever you can, without sacrificing your positive accounts.   

4. Make it a habit to pay on time

Whenever you receive your monthly bills, it’s always advisable to pay them on time. Did you know that late payments may make it more expensive as you will need to pay for a penalty for every payment you miss? To avoid this, set a reminder on your phone to alert you a week before your payment is due. Once you’ve put this into practice, it becomes a habit to pay your bills on time. You can also schedule future payments via Internet Banking to ensure you don’t miss the deadlines.

5. Get organised

When you have different bills to pay each month, it can be a challenge if you are not tracking them accurately. Creating a monthly bill payment calendar can help you figure out which bills you will need to pay accordingly. Set the due date from month to month. That way, you are organised and in control when it comes to your monthly payments and will never miss any of them.

6. Make the minimum payment

All of us have different commitments in life. In the event where you are unable to pay off the full amount, at least make the minimum payment for the month. This helps to control the situation by keeping your debt from growing and keeps your account in good standing and protects your credit score.

7. Have a backup fund

Emergencies can come up at any time. When that happens, you want to make sure you are prepared for the rainy days ahead. A backup fund should ideally cover 3 to 6 months’ worth of expenses. You can work towards this by making it a point to set aside an amount every month to add to the fund.

8. Monthly budget template

When you have a monthly budget to work on, it helps you to plan and foresee if it looks like you are running short of money. Your monthly budget will also be able to tell you if you have any extra money that’s left after your expenses are covered. Therefore, any extra money can be used to help you pay off other debts faster.

At FutureNow Finance, we can send you a monthly budget template by requesting it in the comments below or by contacting us. We can work with you to consolidate your debt by tailoring a finance solution that is best suited for your situation. We can guide you on your financial needs and provide professional advice to get you started today.

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