With the cost of living soaring, many people today cannot survive without debts. Even the smallest of debts needs/has to be paid in one way or the other. Paying up your debts as required and on time is the only way you can manage everything, and possibly build your credit. Servicing large debts involves discipline and a little more effort. This is because you still have to pay rent, bills, and other responsibilities on your shoulder. Discussed below are a few tips on how to manage your debts.
- Make a list of your debts
Make a list of all your debtors, including the creditor. Be sure to include the total debt due, due dates, and how much you are required to pay per month. Making a list of all debtors and how much is owed should help you plan your finances better. Do not let the volume of the debt discourage you; it should just act as an eye-opener to help you see the bigger picture. Don’t just make a list, create a proactive approach as to how you will settle each. Make an effort to settle some of the debts while paying for bills, and update the list accordingly.
- Pay your bills on time
Do not delay paying your bills unless it is absolutely necessary. Paying your bills on time will make servicing debts much easier. It also reduces chances of late payments or fees that come with the same. Missing a payment or two can have a negative impact on your finances, and credit as well.
Use a smartphone or computer calendaring system to help you plan for payments, and even create an early alert for the same. Should you forget to send a repayment on time, do it as soon as you get some money. Don’t wait until the next repayment date to pay. Some banks and credit companies will report late payments to the credit bureau. Prompt payments are therefore recommended.
Tips to Help You Remember Due Dates
- Create a bill payment calendar
A monthly payment calendar can help you figure out what bills and debts need to be paid, and when. Remember to include the bill payment date and amount for easier referencing. Next, fill in your next paycheck date. If salaried, then make a point of settling bills and debts on the same payday. This should save you from overspending and even stay on top of your bills.
- Make the Least Minimum Payment
If your income doesn’t allow extra payments, make a point of paying the least permitted amount for your bills and debts. Although it may not seem like much, making the least payment helps keep your debts on check, which also prevents chances of them accumulating. Your bank will even see this as a kind gesture, hence help you build your credit score. This, however, cannot be compared to missing a payment in the name of you’ll make a larger one next month.
- Service Urgent Debts First
Classify debts based on the repayment urgency. Credit card debts, for instance, should be treated as urgent compared to loans from friends. Credit card companies charge higher interest rates for late payments than banks do. It would also be advisable to pay off high-interest debts and loans first. This will help you save some money in the long run. If you have payday loans get them sorted first – one way is consolidation. Read here to see does payday loan consolidation work
Using your debt list, prioritize debts based on the order of urgency. Some people may choose to settle smaller debts first. This is ok for as long as you don’t default on any.
- Prioritize Debts
One thing you need to know about servicing debts is that you can only pay as much as you can afford. If you have more debts than you can afford to pay, then focus on keeping positive accounts safe. Only service overdue debts after paying for those in your positive accounts. Don’t rush to pay for a loan account that has already been affected by your credit. Creditors will however try to squeeze as much money as they can from your accounts until everything is settled. Don’t let too many of them start harassing you while you can prevent it.
How to pay off collections
- Use an emergency fund
Set up a small emergency fund to help get you out of situations such as an overdue loan. You could also use your savings to get out of debt. Don’t let your credit score be affected when you have access to a savings account. You can start by creating an emergency fund. Most people start off with $1000, then increase the same as time goes by. You will be surprised how much you will have saved by the time 6 months are over.
- Plan your expenses for the month
Having a monthly budget in place can save you lots of frustration in the future. The budget should help you plan ahead, and even know times when your income won’t be enough. Setting up a monthly budget also enables you to save some money in the process. You can even spend the extra money to offset the smallest of debts.
- Know when to seek help
It’s always wise to know just when you need help with debt. This mostly comes when you have nothing to offset bills, with the obligations staring at you. Seeking help from a debt relief company can help you with this. You could even opt for loan consolidation, debt settlement, or even bankruptcy as a last resort. You however need to weigh in the pros and cons of using either of these options.