Formulating Your Debt Management Plan

When it comes to debt, small problems can accumulate into bigger ones if you do not plan and manage your budget properly. For example, a small loan can balloon when you add extra fees and interest rates which can result from late payments.

If you are already in debt, don’t dig yourself into a deeper grave by mismanaging your payment schedule. Here are some tips to help you formulate a debt management plan and implement it:

Know who you owe and how much
Make a list of your debt including the creditor, the total amount you owe, your monthly payment and the due date each month. This will help you keep your debt top of mind and help you get into the regular payment cycle easier.  Communicate with your creditors to ensure that your agreed payment plan is reducing the outstanding balance and not only paying interest.

Stay on schedule for payments
One thing that can derail you from properly managing your debt is late payment. Depending on your loan agreements, this can mean additional fees or an increase in the interest rate. Use smartphone apps or online calendars with an alarm to remind you of due dates.

Set your budget
It is easy to lose track of spending, such as, buying groceries, shopping, purchasing gadgets, renovations, repairs and numerous other expenses you might incur. Monitoring your finances allows you to keep track of where your money goes. It helps you identify which aspects of your daily expenditures you need to reduce or add to, to improve your debt management skills and create a better budget.

Use extra money wisely
Whether it’s an unexpected bonus, a tax refund or income from a freelance project, use any extra money you get to pay off some of your debt. If anything is left after that, you can put it in an emergency fund.


Plan for emergencies
As with any plan, there will be emergencies that may come out of nowhere that may eat into your finances, such as illnesses, hospitalizations and accidents. Set money aside to cover any emergency expenses that you might incur.

Talk to your creditors
The worst thing you can do when you know you cannot pay the debt on time is to stay silent or hide. Talk to your creditors to find out what the effect is if you are not able to pay your loans on time. Furthermore, work with your creditors to build a repayment plan that fits in your budget.

Get professional help
To make your debt management plan better, you can turn to a professional financial planner to assist you. Consult with them on where to put your money, when it is advisable to get a loan and how you can grow your money at the lowest possible risk. If the debt feels too much to handle, you can get help from a credit counselor or a debt relief company to help consolidate debt or work on debt settlement.

These are some ways to help you formulate a debt management plan that increases savings, reduces credit and creates a daily budget.