How we try to manage debt

For many of us, the debt we have accumulated over the years is probably the bane of our personal finances and can often have us feeling hopeless as to how we’ll ever pay them off.

It can be tempting to turn a blind-eye towards debt and want to run away from it completely (trust me, that’s the last thing you want to do), but with a plan in place, paying off debt can be more manageable and less daunting. Here are ways we try to manage debt:

Face the numbers

You can’t make a plan towards paying your debt if you don’t know who and how much you have to pay. It may be hard to face those numbers, but running from them won’t make it magically disappear! Find out who and exactly how much you owe so that you can form a strategy and know what to prioritise, leading us to our next point...

Prioritise your debt 

If you have multiple debts, it’s easy to let them get on top of you. List out all your debts and be clear on exactly what type of debts they are. To find out more about the different types of debt, read our blog here.

Knowing the different types of debt will help you to prioritise, for example, high-interest debts, such as credit card debt, should be of urgent priority whereas debts with lower interest rates such as student loans would be of lower priority. 

Live below your means 

Living below your means will help you to save more money, which you could put towards paying off your debt faster. Take a look at your expenses and see what you can cut down on, whilst paying off your debt. Though it’ll be a sacrifice for a period, it’ll be worth it in the long run knowing that you’re totally debt-free!

Have a strategy 

Having a clear strategy helps you to feel less overwhelmed knowing that you have a plan in place to repay all your debt. 

 Here are two common types of debt repayment strategies:

  1. The debt avalanche strategy

This is the strategy where you pay your debt in order of highest interest to lowest. The debt with the highest interest rate would be the main priority, so you would pay as much as you can towards it, whilst still paying the minimum balance on all other debt.

Benefit: You'll save money by avoiding high-interest rates!

  1. The snowball strategy

With this strategy, you pay your debt in order of the balance amount, starting with the smallest. If your debts have the same balance, you should start with the debt with the highest interest rate and focus on paying off the total balance whilst still paying the minimum on your other debts.

Benefit: The satisfying feeling of knocking out big debts!

Track your progress

Keep track of all your debt repayments. Keep a note of how much and when you pay every time you make a payment so that you can see if you’re on track with your plan. You might also find that tracking your progress may motivate you to keep going as you’ll find it rewarding seeing the remaining debt amount decrease and gain more momentum the more you pay off.

Remember to not let your debts define you. Though it can be overwhelming to even begin paying off debt, with a plan intact, self-discipline, and consistency, you’ll be able to knock out each debt one by one until you’re completely debt-free!


 

The following is for general information and is not intended as a form of financial advice by finndon or it’s representatives, nor the information intended to be relied upon by individuals in making any financial decisions.

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