In challenging or encouraging economic times, understanding how to manage debt is important for your financial health. Sometimes it can be overwhelming.
If you're feeling that way, remember, you're not alone. There are many solutions that can help make debt manageable. But just as it takes time to get into debt, it can also take time to get out of it.
Here are some guidelines to help you manage and reduce your debt:
- Create a budget and stick to it. Budgets can help u gain control of your debt and manage future spending.
- Prioritize your outstanding balances based on interest rate. Pay off your highest-interest debts first. But remember to continue paying at least the minimum amount on the other outstanding balances.
- Consider consolidating outstanding balances into one convenient payment. You might also be able to consolidate balances to a lower interest rate, and save on interest payments.
- Investigate alternatives for paying down your debt. You may want to consider using money from your savings account or using another alternative to help you pay down your debt.
- Source your available payment options. Some lenders offer a variety of payment methods. See what's available and use the option best suited to help you pay on time, every time.
- Utilize services such as Account Alerts to help you remain aware of your due dates and spending levels.
- Talk to your lenders if you're struggling to make your payments. Don't skip the payment altogether, as this will only make the situation worse and impact your credit rating. In many cases, lenders are willing to work out a solution with you.
- Seek advice from a professional credit counselor.
Budgets build healthy habits
Budgets can help you recognize spending habits and identify areas where you might be able to cut back. They're an important tool for managing your debt, and are simple to create.
Download a Budget Worksheet
How to prepare a budget
After downloading the Budget Worksheet , follow these steps to prepare your budget:
- Track your income and expenses: Over a two-month period, keep records of all your money coming in (income) and going out (expenses). Certain expenses may be fixed each month, including rent, mortgage, groceries, insurance premiums, utilities and transportation. Other expenses may vary - such as vacations, entertainment and gifts.
- Create your budget: Use the information you gathered above to help you complete the fields on the Budget Worksheet. It is recommended that you prepare the budget for one month so you can directly compare your monthly expenses against your income. You may also choose to complete your budget from a household point of view. If this is the case, be sure to consider income from all contributing household members and the total of everyone's monthly expenses.
- Follow your budget and keep track of your spending: When you have a good record of where your money is going, see if you can cut costs in certain areas. Or, see if you can add to your savings.