Having a plan to manage your debt can help you sleep more soundly at night, and with Debt Awareness Week 2021 coming up on 22 March, there’s no better time to take control of your debt and take the first steps to financial freedom.
We asked Chris, one of our money experts for their tips for managing your debt.
Lay it all out on the table
It’s easy to think of debt as a big nebulous ball of stress, when really it can be a combination of different terms and conditions, different interest rates and different amounts owed.
Breaking down your debt can help you see the bigger picture and work out where you should be putting your attention, and when you need to be making your payments.
Avoid unnecessary fees
Interest and late fees can make you feel like your debt is suffocating you. You’re paying your debts, but they aren’t going away. It sucks.
The best way to avoid paying more than you should be is by making your minimum payments on time. Even if you aren’t watching these debts disappear, they at least aren’t costing you more money than they should be.
And by making those minimum payments on time, it keeps your account in good standing which means you are less likely to see jumps in the interest rate.
Snowballing is one of the most common strategies to pay off your debts. Not only is effective, but it’s a great way to watch your debt disappear month-to-month and stay motivated with quick wins.
How to snowball your debts:
Step 1 – Create a spreadsheet listing your debts from smallest to largest. Ignore their interest rates – just use the amount you owe.
Step 2 – Make minimum payments on all your debts except for the smallest one.
Step 3 – Pay as much as you can on your smallest debt each month until it’s gone.
Step 4 – Repeat for each debt using the additional money from your paid-off debts until you are debt free.
Don’t forget to celebrate your successes as you go. Paying off your debts is a great achievement!
Talk to us
We can help you take control of your debts – even if you owe us money. We can work with you through breaking your debts down, setting up payment plans, budgeting and helping you save money in other places.
We can even help you make sure you are getting the benefits or financial support you are entitled to.
If you’d like to talk to one of our money management experts, fill out our form and we’ll be in touch.
You can contact the following not-for-profit organisations for free, confidential and impartial advice: