Debt Management Tips to Improve Your Finances

Learning how to manage your money is never easy especially when your financial responsibilities seem to be increasing faster than your monthly income. However, identifying debt management skills and learning how to implement them is key to getting better at managing your money and making your finances work for you.

Below we explore some common debt management tips to help you learn to manage your finances, save for the future and safeguard against growing debt.

Establish what debt you have and calculate the total amount owed

When it comes to managing your money knowing what you owe and what you have is a good starting point. To do this start by making a list of providers you owe money to as well as how much you owe each creditor including fees and interest. This will give you a clear view of your debts and how much you owe.

While it may seem like not knowing is less stressful, avoiding your debt is likely to cause bigger more serious repercussions down the line. On the road to financial freedom the first step is acknowledgement and ownership of one’s financial situation.

Create a budget and list what you earn, owe and spend

Now that you have already established what you owe and to whom, you need to create a list of what money is coming in and what you spend on living costs such as groceries, electricity, water and transport.

By establishing a budget, you will be able to get a good idea of your financial situation, where you can cut back and reallocate money to repaying or decreasing your debts.

Consider debt consolidation

Trying to keep track of multiple credit cards, clothing accounts and other debts, fees and interest owed can feel overwhelming and quickly eat away at your money.

If your debts have gotten out of hand and you are struggling to keep track of your money, perhaps it is time to consider applying for a consolidation loan.

A consolidation loan is a loan you take out to settle all your other debts. This way you only need to repay one amount each month instead of multiple debts each with their own fees and interest rates.

However, before you make any decisions, you’ll want to investigate whether you are taking a loan from a registered credit provider and that the interest rate and loan fees are affordable, or you could end up paying more.

Lastly, this will only work if you take control of your repayments and are consistent or you could easily end up just accumulating more debt.

Repay your debts on time

An essential aspect of taking charge of your money (and debts), is paying your creditors on time, every time.

Besides the increase in interest rates there are a number of reasons why paying your debts late is bad, such as:

Repay the full amount instead of the minimum

When it comes to repaying creditors, you are usually given two repayment options –

to settle the borrowed amount in full, or
to pay the minimum interest amount due.

Paying the minimum amount may seem like a good idea but the cost of repaying the money you owe increases every month you do not settle the amount you owe. Remember that you incur interest on the balance that accumulates each month you do not settle, meaning you end up owing more by paying the minimum.

On the other hand, if you are able to settle the full borrowed amount each month on your overdraft or credit card you are likely to pay no or very little interest on the borrowed money.

Make extra repayments

If you really want to reduce your debt fast and you have the financial means to do so, consider making additional payments or increasing your repayments on your debt each month.

The benefits of this is that if you increase the amount you pay you are more likely to reduce the capital amount owed instead of just paying off the interest on your debt. Additionally, the interest you pay will be less as you are decreasing the total value of the amount you still owe, each month.

However, before paying additional amounts toward your debts be sure to check the conditions of your loan as some types of loans require you to pay a fee for paying your debt off sooner than the stipulated end date.

Know when to ask for help

The first step to getting back on the right financial track is to admit that you need help.

We have a number of debt specialists standing by to help improve your financial well being and help you enter the financial recovery phase.

Speak to one of our NCR registered counsellors today for your FREE debt assessment.