Sometimes we may find ourselves in a tough financial spot where the only way out is borrowing a little money. Several financial institutions or friends may be willing to lend some amount. However, if the situation does not turn in our favor, we might find ourselves struggling to pay up the debt. If the whole debt situation gets out of hand, it might become overbearing for us and a source of stress. To avoid finding ourselves in such situations, here are a few strategies to manage our debts.
Make a List
Knowing who we owe by exactly how much is the first step toward successful debt management. In the list, we should include the due dates and try calculating how much of the debt we can manage to pay on a regular basis, say, monthly. Interest rates should also be included in the calculations for us to have exact figures. Since we want to keep track of the debts, a periodical update of the list is essential. Making subtractions on the dues, we have already paid off will give us a clear picture of how far we must go.
It might often be easy for us to be carried away by the weight of the debts that we forget that we also have regular bills to pay. This is a common yet terrible mistake that we make. If bills are ignored, they even begin to pile up, adding to the debt load we are already struggling with. Therefore, for the successful management of debts, we should ensure we always set some funds aside to cater to our bills as much as we try to clear some debts at the same time.
Know My Limits
It is often very tempting for us to clear the whole debt once we come across some money. As much as that idea sounds very attractive and appealing to us, it is never the best way to go. Remember, if we spend all our money paying off a debt, we will have no money left to cater for our daily errands. The situation will lead us into another debt, which was not the aim. Therefore, although sometimes it might not feel like much, paying off our dues a little per period is the most ideal way to go.
The prominent way to identify the debts to settle first is to look at those rates of interest. We ought to cater to the debt with the highest interest rate first because the longer we drag it along, the more it shall cost us. Also, the dues that carry the most money should be put at the top of the list. Once we are done paying off the urgent matters, the less pressing debts can now be taken care of. If we have a good balance after taking care of the significant dues, we could use the extra cash to settle the less significant debts as well.
After clearing all the dues we have, saving up is the smartest thing to do with any extra money that comes our way. Saving is a decision and move that we shrug or make excuses against. However, if we could manage to set up a savings account, the money could come in handy the next time you need it. This way, we will not need to go so far out of our way to raise funds to cover the expenses. Even if the funds are not enough to fully cover the expenditures, the cumulative money we shall raise in debt will be significantly reduced.
Knowing this, saving up becomes an excellent idea to manage debts.