Every individual owing debts has to manage his debts – irrespective of the amount of debt. If you owe a little amount of debt, you should pay it off by making regular payments so that it never goes out of control. In contrast, if your debt amount is quite high, you should put more effort to pay off outstanding debts, you shouldn’t juggle with the payments.
Here are some solid steps that would help you manage your debts easily and efficiently.
1. Know Your Debt
First of all, you need to know how much debt you owe. Create a list of all debts including your creditors, total debt amount, monthly payments and due dates. Make use of your free credit report to confirm the debts on the list. Refer to the list on a regular basis, especially when you make payments. Keep updating the list on a monthly basis as the debt amount keeps changing by every passing month.
2. Make Payments on Time
Late payments are always bad for your financial health as it associates late fees. For example, if you skip two payments in a row, your finance charges along with interest rates will be increased. Set an alert on your mobile phone to remind you a couple of days before the due date. If you skip your due date, don’t wait till next one to disburse your payment as by then late payment might be reported to the credit bureaus. Try to send the payment at the soonest possible time.
3. Create a Bill Payment Calendar
You can create a bill payment calendar that would help you figure out which bill to pay with which paycheck. Write every bill’s payment amount next to the due date, and then fill in each paycheck’s date. You can use the same calendar in case you have a fixed salary date every month. Otherwise, you need to create new calendar every month.
4. Make Minimum Payment at Least
If you can’t pay more, make sure you make at least minimum payment every month. Though it may not help you make any great progress in paying off outstanding debts, still it keeps you going and keeps you from piling up debt burden. If you miss a payment, you may fail to catch up and your account may go into default.
5. Pay Off Higher Interest Debts
You need to understand your priority. Of all debts, the one with highest interest rate should be paid off first as it costs maximum amount of money. However, you can also pay off the debt with lowest balance first.
6. Build an Emergency Fund
Without having enough savings, you can’t manage your personal finance. Even a small fund can cover expenses that would pop up even in the mid of the month. It would be easier for you to build a fund if you have your own house and don’t need to pay a rent. If you have a rented house in Coimbatore or anywhere else, you will always be burdened with rent. Try to create at least a $1,000 fund and gradually try to make it bigger so that the fund can support at least 4 to 6 months of living expenses.
You can talk to a debt counsellor if you need more help. He would be the best person to help you get rid of debt challenges in due course.
