Finances & Money

5 Steps to Taking Control of Your Debt

Living with debt is never easy. While for some of us, debt is a necessary evil than can be managed, for others, it’s a spiralling nightmare of increasing interest rates and endless collector calls. But it doesn’t have to be that way. There are some debt management methods anybody struggling with debt can use to get out of their situation and keep it under control. Here are a few of them.

Make an Honest Inventory of you Debt

You have to make a clear list of all your outstanding debt. This will include the creditor’s name, amount due, monthly payment and date due. If you can’t make a clear inventory of your debt, make a summary and order a copy of your credit report.

You can get a copy of your credit report from all three major credit bureaus for as little as £2. Your credit report will have a full rundown of your outstanding bills and you’ll be able to verify it against your list. This will also give you an opportunity to review your report, see if there is any debt that has been paid off but still present and make some revisions if needed.

Create a Calendar and Pay Bills on Time

Late payments on bills can be the worst thing for your credit and debt. Not only can they affect your credit negatively, but late fees can easily climb up, as can interest rates. Once fees pile up, it can be difficult to resolve your debt and get back on track.

This is why you should set a clear calendar for your payments and address each bill with a corresponding pay check. You should also set notifications on your smartphone or computer and set notifications several days before the due date to make sure that you don’t miss a payment.

Try to at Least Pay the Minimum

If you have no other choice, try to at least pay the minimum required. While it won’t make that much of a difference on your overall debt, it will prevent fees from accumulating. Also, it won’t trigger a late payment and your credit won’t be affected. You’ll stay in good standing with your creditors and prevent your account from going into default.

Pay by Order of Priority

You have to prioritize your payments first. If you don’t have a mortgage to pay, your credit card debt usually should come first. This is because the interest rate on credit cards is much higher. If you have multiple cards, try to pay off the one with the highest interest rate first.

Focus on your Good Accounts

By now, you may be already late on some of your payments. While it may seem like a wise decision to focus on these accounts first, it is often better to take care of your good accounts and pay off past due debt when you can. The last thing you want to do is ruin your good accounts to pay off past due debt.

These few tips alone should help you reduce your amount of debt and keep your monthly payments under control. By applying a few sound budgeting and planning tactics, anyone can avoid the vicious circle of never ending debt.

 

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Susan Paige

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