Debt Management: A Beginner’s Guide

However much debt you are in, it’s essential that you manage it properly. If you fall even slightly behind with your repayments, then this can quickly lead to soaring interest rates that significantly increase the amount you need to pay back. For those struggling with more debt than they can possibly afford to pay back, it’s a good idea to speak to a professional financial advisor who can help you restructure your debts into something more manageable. Even if you aren’t in quite such a tough situation, though, it’s still a smart idea to take a more hard-line attitude to your debt management. Read on, and we’ll help you to make the right decisions with regards to debt management, so that you are always on top of your repayments.

Keep track of just how much you owe

First things first, you’ll want to sit down and make a full list of all the debts that you have to repay. It’s easy to forget about some smaller financial commitments when you have larger ones to focus on, but in the meantime these will continue to build up. These unpaid debts can also have a serious effect on your credit rating, which will make any future financing more expensive for you to take out. On the other hand, if you have everything written out in front of you, then it helps you to keep track of the bigger picture. Just make sure that you regularly update this list in light of your changing financial circumstances- otherwise, you could end up falling behind again.

Make sure you pay on time wherever possible

We’ve already covered the concept of prioritizing your debts in a previous post. However, while there are some debts that can occasionally be put off, or paid back in smaller amounts, you should never rely on this approach in the long term. In most cases, if you miss a debt repayment, your creditor will charge you a late fee which can often be even higher than that month’s scheduled payment. If you miss two months in a row, then don’t be surprised if the creditor increases your interest rate accordingly- as well as slapping you with even more fees. You should therefore try to always repay your debts in full each month. It’s useful to put the dates for all your repayments on a calendar so that you can always see what’s coming up, and then budget accordingly so that you don’t miss a payment due to a lack of funds.

Always hand over the minimum payment

Of course, we understand that everyone’s financial circumstances are different, and you might not always be in a position where you can afford to make a full repayment on every single debt. Even so, you should still try and ensure you make the minimum required payment each month. While this might not make much of a dent in the total amount you have to ultimately repay, it will stop that amount from increasing, so you won’t find yourself even deeper in debt. It also keeps you from ending up on the receiving end of the increased rates we mentioned above. The more repayments you miss, the harder it will be to catch up, so don’t put yourself at risk of this. Instead, be sure to set aside enough to cover at least the bare minimum required each month, to limit your debts to something you can still manage.