Managing Your Debts

With the pandemic happening all over the world, businesses closing, jobs lost and we still need to go on to live our lives. There's bills and loans to pay, tuition fees to fund, essentials to buy monthly and more. With all of these piling on, we can't help but feel overwhelmed, frustrated or scared. But because we are staying home, there's no traveling, no shopping, no dining out, no unnecessary spendings, there's a way to manage your debts.

Understanding your current situation is the first step. Lay out all of your current debts: mortgage, loans, credit card, etc. Best to list them down on your journal or planner or you can use MS Excel to have a visual of what’s going on. This list is essential because this is something you will refer back to and check every month to monitor and check your progress. In this list, include the interest rates for each is another essential step, to know which ones are charging with the highest interest rates.

Paying your credit card debt is often one of the best approach. You can start paying off the smallest amount first. Tackling the “easiest” debt to pay can build your confidence and eventually build momentum you need to pay off your other debts. Just remember to not use this credit line once you have paid them off to avoid incurring more debts.

When you can’t pay for anything more, at least make the minimum payment. This is not the best tip to making progress with your debt but this is to keep your account in good standing and avoid paying late charges which are not a small amount by the way. And when it is possible, pay more than the minimum.

Another one of the most important steps in managing your debts is to be honest with your spendings. Are there additional or unnecessary expenses that you can cut back on? Eliminating these non-essential expenses is also reducing additional debt. And when you eliminate these unnecessary costs, there’s more to put toward your debt. Even the smallest amount you can set aside is a big help.

There’s also the option to consolidate your debts, it’s a product that offers single payment for your debts with a lower interest rate. You can learn more about debt consolidation by clicking here.

Now, that you know where you are standing, build an emergency fund and searching for other revenue streams. It doesn’t have to be a big amount, but enough to cover your unexpected expenses. You can start small (USD 1000) with the ultimate goal of growing your emergency fund in the future. As for extra revenue streams, it also doesn’t have to be big, but when you are earning, even small amounts are additional funds to help you eliminate your debt. And your debt is more manageable, you can start adding the extra income to your emergency funds. 

Incurring debts can affect our mental health and by taking these little steps are steps to the right direction and eventually free from debt and have financial control of your life, which is what you are aiming for. So stick your plan, stay on momentum and learn from the process.