Being in debt can be a stressful and trying situation to face. Often as one debt is amassed subsequent debts are then entered into in order to pay off other financial commitments. This spiralling circle of debt is what causes financial breakdown and in the end it can be difficult to know where to turn. No matter how arduous the thought of combating debt may seem, it is essential to remember that there is no debt situation which cannot be remedied safely and in a controlled manner. There are a number of key techniques which can be used to manage debt, reducing it in a consistent and continual way until any and all required payments have been cleared.

Top Debt Management Tips

The hardest part of managing debt is knowing where to start. Sometimes there can be so much of it from so many different lenders that the task seems impossible. Thankfully, with some research and diligence, any debt can be tackled.

Some of the most effective approaches to debt management include:

• State of Mind: The first step is to cultivate a positive frame of mind. This might seem difficult under the circumstances, but with the knowledge that any debt can be cleared safely, there should be a level of confidence in such efforts to reduce it. Denial is dangerous and should not be used as a comfort blanket. The only way to combat debt is to accept that it will take a long time, but knowing that each small step will bring the goal of being debt free that bit closer.

• Creating a Budget: Anyone in debt needs to know their budget. This is the amount of money a person has available to deal with their debt situation each month. This should incorporate any income from an individual, their spouse, supplemental incomes and interest from any bank accounts accrued each year. By adding all of these totals together an individual has a budget figure for making any financial decisions including reducing debt.

• Listing All Debts: One of the most effective techniques used against debt is list making. It might sound fairly undramatic, but lists allow for more organisation and a systematic approach to debt reduction. After creating a budget, the next list should involve listing all debt payments which need to be made each year. There will be two figures which will be needed for each debt: the minimum payment required and the total amount owed overall. These will be used in subsequent steps. By doing this, an individual should now have an idea of how much money they need to pay out each month in order to remain financially secure. Sometimes the amount owed will be more than is in a budget. If this is the case, then there are still financial actions which can be taken and will be discussed in subsequent steps below.

• Making Sacrifices: Here, an individual should make two lists. One list is for necessities, everything which has to be paid each month. This includes all minimum debt payments, food, energy bills, rent, travel to work and any other outgoings which cannot be sacrificed. The second list is for everything else, known to be a luxury. This can include television packages, non-essential food and drink, hobbies – anything which can be sacrificed and is not required to live. When the necessities total is taken away from the available budget this provides an idea of how much money is left to pay off any debts. This will also provide a clearer picture of whether or not some luxuries can be maintained; however, it is always beneficial to clear debt as quickly as possible, so individuals should be strict within reason.

• Prioritising Debts: Looking at all debts, list them from most expensive to least expensive on a monthly basis. The most costly debt each month is the debt which should be prioritised above all others. For every debt, an individual should pay only the minimum amount required, which usually does not reduce the debt and simply pays off the interest. This might seem like a bad idea as those debts will not be reduced; however, any money left over from the budget should now be put towards the most expensive debt. This means that with each payment, that debt will be reduced quicker. Once this debt has been cleared, the money saved should then be put towards the second most expensive debt. This is called “stacking”, and it is a very effective way to systematically manage several debts at once.

• Alternatives: Looking at the necessities and luxuries lists, it is more than likely that cheaper alternatives can be found. This is often the case with food shopping and other unavoidable expenses. By planning meals, buying in bulk, and using cheaper brands, a good amount of money can be saved which can then be put towards debt payments.

• Debt Advice: If debts are still too difficult to handle, then it is best to consult a free debt advisor who will be able to renegotiate debts on an individual’s behalf, in order to reduce payments to a more manageable level. Other resources include conscientious debt collection agencies such as Wescot, who will do their best to find the appropriate solution for anyone in debt they have been instructed to speak with.

Stay the Course

Debt management is all about consistency and organisation. It can be stressful, but any debt can be dealt with appropriately, either by the above methods or through contacting a reliable debt advisor. The main point to keep in mind is that every difficult journey starts with just one step. With discipline and hard work, anyone can become debt free in the long term, they just have to stay the course.