The best way to end the year in a positive financial position is by following certain debt management tips. The truth is, debt is powerful enough to hold your finances back. This is why it’s very important for you to keep it under control.
In a consumerist society, it’s not wise to completely stop using debt. It’s possible. But you’ll miss out on a lot of opportunities if you do this. You’ll miss out earning passive income from real estate properties. You can also miss out on generous credit card rewards and loyalty points. You could have earned these if you used it to pay for your usual expenses.
You have to understand that debt is not really bad. The $12.68 trillion worth of debt of Americans is not all bad debt. More than ¾ of these debts are mortgages. This is one of the good debts because it can help you increase your personal net worth. You also have student loans that are also good debts because it increases your ability to earn higher pay.
You see, it’s not too bad to use debt. It can help improve your finances tremendously. But you have to learn to use it properly. And you also have to understand the responsibility that you have to meet when you have debt. This is where debt management tips can help.
5 debt management tips that will improve your finances
Believe it or not, you can manage your debts in such a way that will improve your finances. As long as you follow certain tips, you can regain financial control even while you are struggling with debt payments. And if you do things correctly, you probably won’t feel like your debts are a burden.
Here are 5 of the debt management tips that you can use to help improve your finances.
Decide what debt to pay off completely this year
It’s not enough that you make regular contributions to your debts every month. Try to make a commitment to completely pay off one debt this year. The end of the year is only a couple of months away so this might be a bit challenging. Choose a debt that has a low balance and create a plan that will help you pay for it by the end of the year. Just make sure you pay at least the minimum amount for the rest of the debts. Then use all the extra money that you have to pay for the debt that you’ve chosen to get rid of.
If none of your debts can be paid off by the end of the year, at least set a target amount. Try to have this amount paid off by the end of the year. This target will at least give one of your debts a significant debt reduction.
The goal here is to give yourself a huge reduction in your balance by the end of the year. If you can pay off one debt, that will really give you a huge morale boost. Hopefully, it’ll encourage you to keep going until you pay off every single one of your debts.
Have a definite repayment strategy
Another one of the debt management tips that you should do is to have a definite repayment strategy. Once you’ve chosen the debt that you will aggressively pay off by the end of the year, create a plan that will help you pay it all off.
There are a couple of debt relief options that will make payments a lot easier. You can opt for debt consolidation, credit counseling, or even debt settlement. Get a debt reduction if you have to. This will help lower the debt amount you have to pay.
Make sure that this plan will help you reach your target payments. But at the same time, you have to ensure that it won’t make your life miserable in the process. Leave yourself some room to have enough money to pay for your needs.
Cut back on unnecessary spending
When you have decided on the repayment plan that you will use, it’s time to look at your budget plan. Whatever repayment strategy you’ve chosen should be aligned with your budget plan. To be specific, check your expenses and see how you can increase your debt payment fund significantly. Maybe there are expenses that you can cut back on until the end of the year.
This will involve some sacrifice but it should be worth it if it means getting a huge improvement in your debt situation. It’s only a couple of months anyway. But make sure you don’t make yourself miserable in the process. If you feel miserable, you might end up not completing the program you started. For instance, remember that this period also includes Holidays. So give yourself some budget for that.
Increase your income
If cutting back on expenses is not enough, you should try to increase your income to pay off your debts. This is one of the debt management tips that will proactively help you pay off your debts.
Find a freelancing job that you can work on during your free hours. There are many companies who had to move their business online because of the 2020 coronavirus pandemic. If you have a skill that you can do online, like writing programming, coding, designing – these are skills that you can use online. You can also think of a hobby that you can capitalize on. Maybe you can bake or cook something special that you can sell. If you’re good at carpentry, this is also something that you can earn from.
Anything that you earn on the side can be used to pay off your debts by the end of the year. The more you earn the more you can pay off.
Seek professional advice
The last of the debt management tips you have to learn is to ask for help. In particular, you need to look for a debt expert who can explain to you the options that you have. You can rely on them to guide you throughout the debt relief process. And if you encounter problems with your payments, they can give you the options that will help you recover regardless of what your current situation is.
Sometimes, people who are trying to pay off their debts feel more confident if they know they have someone beside them for support. Unfortunately, some people feel embarrassed to share their debt situation with loved ones and friends. But since a debt expert is a stranger, you can rely on them without worrying that they will judge you. And since it’s their job to help you, they won’t leave you until you’re debt-free.
How to stick to your debt management plans
All these debt management tips should help you achieve complete debt freedom. But since it will take time for you to completely pay off your debts, you need to have a plan to sustain your monthly payments.
Here are some of the things you can do.
Know why you’re doing it
Start by keeping in mind why you’re doing this. This is a powerful motivator. We all know that we have to pay off our debts. In fact, one survey revealed that 51% of respondents want to prioritize paying off their debts.
But why do you have to insist that it should be done by the end of the year? That would mean extra effort. You must have a strong reason to make the sacrifices needed to pay off your debts fast.
Use a budget plan
Another strategy that will make it easier to implement debt management tips is to use a budget plan. If you aligned your debt repayment strategy with your budget plan, you can always ensure that it’ll be funded. To be sure that the funds won’t be compromised, mark it as your priority.
Develop the right habits
It’s easier to maintain your debt management plans if you are implementing the right financial habits. These habits include budgeting, saving, smart spending, and other habits that will improve your finances. Since you are used to these habits, making the right decision about your money will come naturally.