Managing your debt is vital to avoid losing control of your financial situation, and ending up with a bad credit rating.
5 Principles for managing your debt
- Make a list of all your debts
- Start by making a list of all your debts, bills and outstanding payments, including interest. This will help form the overall picture of your current debt position. Knowing this will allow you to forecast future payments and ensure you prioritise a portion of your income to service these debts.
- Create a budget
- Simple budgeting skills will help you in paying off your debt. Once you understand your monthly debt expense (fixed or variable), allocate your income towards paying off your debts first. Try actioning this as soon as you receive your income to avoid any excessive spending, which will only contribute to your debt challenge. Work out where you want your money to go with this budget planner.
- Think of the end goal
- It can be difficult to focus on anything other than your unwanted debt. However, to effectively manage your debt, it is important to set goals to ensure you are moving in the right direction. A great way to do this is to ‘begin with the end in mind’, meaning picture the time in the future when you’re free of your unwanted debt. Continue to work towards your goal of being debt It won’t happen overnight, but with patience and help you will get there.
- Keep up with your payments
- As simple as it sounds, this one is often easier said than done. As long as you’ve made the previous steps, you should be on the right track to managing your payments. Ensure you at least make the minimum payment each month to avoid additional interest and charges.
- Implement a monthly payments calendar
- Implementing a monthly payments calendar can be an effective tool to make sure you’re prepared to meet your monthly debt obligations. Remember, try not to focus on the debt, focus on the end goal of waving goodbye to your unwanted debt.
If the above steps are out of reach and you have become unable to manage your debt, it’s time to reach out for help.
If you’re unsure about how much debt you owe, list them all using this asset stocktake calculator and find out where you stand. This will give you an idea of your overall financial position.