5 Tips for Better Debt Management

It may not be possible to completely eliminate debt from your life, especially if you have made important investments such as buying a home or pursuing higher education. However, the debt you have can be managed carefully so that you have better control over your finances. Ensuring that your debts are well-managed will also reflect positively on your credit health in the long run.

Here are 5 tips on how to manage your debt better.

1. Record Your Expenses and Make a List.

The best way to get debt under control is by analysing your spending behaviour and identifying all unnecessary expenses. For one month, record every cent you spend, including what you may consider minor expenses (like food or movie tickets). By doing this, you’ll be able to see clearly how much of your spending is fixed and how much is variable.

Next, make a list of all your debt obligations and the interest you’re charged for each. Put them in order of interest rate, from highest to lowest. Once you’ve done these steps, it will be easier to see where you can cut down on your expenses.

A good way to know more about your finances, credit health and credit score is to obtain and check your full credit report. For instance, a full MyCTOS Score report will give you comprehensive insight on all major areas of your credit health and let you know where you stand in the eyes of banks and lenders.

2. Cut Back on Extras.

Add up the expenses on the list and compare the amount to your monthly income. If it’s less than what you earn, use the extra money as your debt payment. If it exceeds your income, figure out which variables you need to cut back on.

3. Lower Fixed Expenses.

Find creative ways to lower your household bills, move to an area with cheaper rent or refinance your mortgage to get a lower interest rate. If you have a good payment history, you may ask your credit card company if they would consider lowering the interest rates they charge you.

4. Find Ways to Increase Your Income.

Consider whether there’s any way to boost your salary, such as paid overtime hours or public holiday working options. You may also want to think about secondary income generators, such as coaching, teaching, freelance work or running an online business.

5. Settle the debt with the highest interest first.

Once you figure out the maximum amount you can afford to pay off each month, focus on resolving the debt with the highest interest rate first. This way, once the debt is settled, you’ll save in the long run on high interest rates.