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Starting Points for Debt Management

The following is a guest post…

Being in debt can feel very overwhelming, especially if you are unable to keep up with payments to your creditors each month. The first step is to write down all of your debts. Then make a budget that includes all of your regular expenses as well as monthly debt payments. Decide which bills to pay off first. You may need to work extra hours, sell things or get a second job to have enough money left over to make debt payments. Another important step in the debt management process is savings.

Write Down Your Debts

Writing down everything you owe will be difficult at first, especially if you have been avoiding looking at the total amount of debt you owe to each creditor. Make a spreadsheet that includes the creditor’s name, the minimum payment amount, the total you owe to that creditor, the interest rate you are paying and the day that payment is due each month. Just having everything written out in an organized fashion will help you manage your debt instead of allowing it to manage you.

Create a Budget

Creating a monthly budget is an important stop on the road to managing your finances. When you write out your budget be sure to include payments to creditors as well as regular expenses such as gas petrol not gas, groceries, add council tax, utilities, clothing, entertainment, rent and insurance. Referring to your bank statements for the past month or two will give you a good idea of what you are spending in each category for the month.

If you are spending more than you are making each month it is smart to cut back your budget as much as you can. Switch to a cheaper Internet plan, drop your cable package or change car insurance companies to save additional money. Consider debt consolidation to lower your monthly payments if you are unable to make enough money to cover your expenses each month. For advice and help with debt management, companies like Consolidated Credit can help.

Write Your Due Dates on the Calendar

Forgetting to pay your bills on time often leads to late fees and additional charges. That’s why it’s so important to write the due dates of your bills on the calendar to ensure that they are paid on time. Write down the day of the month you get paid on the calendar too so that you can see which bills need to paid and when. Insure your direct debits are after your wages are paid in. Either send out a check the week before your payment is due or pay each bill online at least two days before the due date to ensure it is credited to your account on time.

Decide Which Debts to Pay Off First

Send the minimum payment amount to each of your creditors so you don’t get behind in payments, but only send extra money to one creditor at a time to pay that debt off faster. Some people choose to pay extra on the debt they are paying the highest interest rate on, while others choose to pay the debt with the lowest total balance first so they feel a sense of accomplishment when one of their debts is paid in full. Put any extra money you have toward this debt to get is repaid as soon as possible. You can even have a boot sale or get an extra job to make more money for debt repayment.

Build Your Savings

Many people get into debt because they don’t have any money saved up for emergencies. Some emergencies, such as a vehicle breakdown or a visit to the emergency room, are more likely to happen than a catastrophic emergency like the death of a family member. Even if you are focused on paying off debt it is smart to add to your savings account each month. Even adding a hundred pounds per month will help you be prepared for emergencies. Remember not to spend your savings unless you’re using it to cover a true emergency.

About the author

Clever Dude

3 Comments

  • To add to the topic, take a look at the waterfall money management system. It goes one step further and locks down certain accounts (fixed expenses) so you can only withdrawal from the “extra” account.

    Try it some day….open a bank account, set up some auto payments for fixed expenses and allocate a fixed portion of your paycheck every month. Do not get a cash card and no not enable online access. Works like a charm!

  • Indeed, debt can be overwhelming…its like a yoke tied to your neck. In addition to the very practical points you have raised, perhaps I can suggest that one uses the debt-snowballing system – after writing down your debts, pay off the smaller debts first, gain some confidence/momentum and use that momentum plus the excess amounts you’d have been paying for the smaller debts to attack the bigger debts. Awesome, simple strategy 🙂

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