10 Tips to Improve Debt Management
Money on Your Mind

It is surprisingly easy to get into debt, as many of our readers will agree, but it seems even easier when compared to getting back out of it again. There are drastic remedies to debt that supersede the tips that we will present in this feature. Rather than being a quick fix to existing debt, we wanted to tackle the idea that those already managing their debt well can still improve on their current efforts by tweaking their overall strategy.

1. Avoid Adding to Existing Debt

To move forward with debt clearance, it is important to put a freeze on accruing more. Every new debt adds more interest that must be paid and managed on a monthly basis, and any movement in the opposite direction to what you are looking to achieve will naturally result in major delays in the overall payment plan.

2. Increase Regular Payments

A great mindset for those seeking to get out of their debt as quickly as possible is to treat payments as an expense. If the individual can increase the size of this expense, then the debt will naturally shrink faster. This goes hand in hand with the reduction of interest payments, as the lower the balance, the less interest will be charged on it, ensuring that making such payments becomes progressively easier. This tip can be used to either make payments more frequently, or to increase the size of the monthly payments over and above the minimum amount.

3. Get to Work on an Emergency Fund

Most individuals have heard of an emergency fund, but relatively few have put it into practice. In simple terms, this is a stash of cash that is on hand if something unexpected happens, such as risking meeting a debt payment or something going wrong day to day. There are various schools of thought on the mix of debt and savings, as those savings will rarely accrue interest at the same rate as their respective debts. However, anyone that already considers their debt as being manageable should always seek to keep some money to one side. This carries the added benefit that if and when the unexpected should happen, those with an emergency fund can dip into their own cash rather than needing to build more debt with a loan or credit card.

4. Tackle the Most Expensive Debts First

There is validity to the tactic of choosing one debt and then giving it all you’ve got, with other, cheaper debts continuing to receive the minimum payment each month until the priority is comfortably paid off. This not only maximises the reduction in interest charges across all debts, but can also help psychologically, demonstrating immediately that the efforts of the debtor are paying off regularly.

5. It Never Hurts to Ask for Better Terms

Some debtors fail to consider asking the owner of their account for reduced interest rates, payment holidays or other helpful extras when their debt is outstanding, preferring to assume that it would not be in their interest to do so. However, the owners of these accounts would prefer something to nothing, and those that make regular payments and have held their accounts for an extended period are often well-positioned to tip the balance in their favour.

6. Consider Short-Term Ways to Pay Down Debt Quicker

Among the crucial messages across these tips is the lower the balance, the cheaper a debt becomes on an ongoing basis. If there is any possibility of making a big payment in one lump sum, then this can be an excellent idea for the health of ongoing finances. Debtors can consider selling unused items, taking on temporary additional work or anything else that quickly increases cashflow. In dedicating these funds to the debt, each monthly payment becomes much easier to manage.

7. Look into Balance Transfers

Again, the cheaper a debt, the easier it is to manage, and any opportunity to reduce the monthly cost of a debt in terms of interest is one that should not be ignored. Those with credit card debt and a good credit score can consider applying for a balance transfer card, which will usually give the cardholder a reduced or even zero rate for a fixed period, eliminating plenty of the associated stress. Those with loans or multiple credit cards may consider consolidating their debt into a loan, which are typically charged at lower interest rates for those with good credit, with the added benefit of rolling all debt into a single monthly payment.

8. Consider Freeing Up Funds from Other Savings

Some individuals that are in debt may be able to free up cash from alternative sources. This could be a retirement fund, insurance policy, stocks and shares or anything else. The crucial decision comes down to whether the size of those savings is increasing at a faster rate than interest is being added to debt. If the debt is more expensive, freeing up cash in the short and longer-terms can often be an excellent solution.

9. Make a Plan

Planning is a handy tool when undertaking any major task, but a solid plan that is realistic and ready to action right away can be the best tool of all when tackling debt. Knowing what to pay, when and how much of a reduction in payments it will result in will lead to debtors managing their money better, going over the minimum payment and seeing real results from their actions.

10. Consider a Lifestyle Change

It makes sense that the more disposable income you have, the easier it will be to pay down debts. This varies from person to person, but someone that eats out 3 times each week could consider reducing the number to 2 or 1 while transferring the money saved towards one of their debts.