If not properly managed, debts can pile up faster than you can imagine. This is because most people find it difficult to pay off their little debts and still go-ahead to borrow more. The resulting effect is more debts. Having a lot of debts to settle can be overwhelming, but you could care less if you have a proper debt management plan. Here is how to go about it:
1. Create a budget and stick to it
A personal budget that works is one of the best strategies to track your expenses. Without a budget, you may not understand your finance and know your net worth. Although it might be difficult to follow a budget at first, it can be a very helpful tool to manage your tool and keep track of where your money goes. Mint, PocketGuard are some applications you can use to track your expenses.
2. Increase your source of income
When it comes to managing your debt, there are so many effective strategies. After creating your budget, learn to cut costs and increase your income. If you are a full-time employee, you can take up more jobs, learn new skills that could be useful for side-hustles.
3. Use a debt avalanche strategy
Once you have found more ways to earn extra cash, the next thing is to decide how to channel the cash to pay off your debts. In this case, the debt avalanche strategy becomes an effective tool. Use the debt avalanche tool to draw up a list of all your current debts. The best way to list your debts is to start from the one with the highest rate to the one with the lowest.
4. Consider credit counselling
You may need the help of a professional or credit counselling agency. They help you manage your debts and finances making the whole debt payment process easy for you. Certified credit counsellors help negotiate with your creditors and create an affordable debt management plan. The debt management plan is different from debt settlement and as it helps you to pay your accounts in full without defaulting.
5. Track debt recovery strategy
Paying off all your debt is an ongoing process as it doesn’t happen overnight. It can wear you out and be a big distraction from your goals. Tracking your progress is important. Keeping a chart or a reminder of your debts and your progress will remind you of how many debts you have settled and the ones left.