Getting into debt is a situation that no one wants to be in. Finding yourself in a situation where you’re struggling to pay off your debt is stressful and affects your wellbeing. Learning how to manage your debt effectively is important in order to avoid more unsettled debt piling up. Here are our money and debt management tips that will help you take control of your situation better.
1. Organise and list down finances
A good starting point is to organise and list down all your finances – this includes your income, monthly expenses and the amount you need to pay off. Having your balances laid out in front of you makes it easier to come up with a debt management plan. Keep track of all your due dates to avoid missing a payment.
2. Avoid accumulating more debt
While this may seem obvious, there are people who fall into debt and then take out personal loans to settle the debts that are due. However, this is counterintuitive as many of these personal loans may have high-interest rates that will accumulate over time. Never resort to loan sharks, no matter how desperate you are. Not only is it dangerous, but you’ll end up in a worse financial position than you were before.
3. Choose the right repayment method
Take note of the amount, due date, and interest rate to decide which debt to prioritise. A general rule of thumb is to settle the debt with the higher interest rate first. It may be tempting to just pay the minimum amount you owe, but if you can afford it, paying the full amount is a more effective way to manage debt. This is because an interest rate is incurred on the balance amount, and this will carry forward into the following month, making it more difficult to catch up on your payments.
4. Do not spend beyond your means
If you’re in debt and find yourself struggling to make ends meet every month, it may be time to evaluate your spending habits. Ask yourself if you are spending beyond your means. Your daily coffee, eating out, and TV subscription are all “extras” that can be categorised as unnecessary expenses. Although it may be difficult to cut out these little luxuries, putting this money towards paying off your debt first will put you in a better financial position in the future.
When it comes to financial and money management tips, you can count on Singlife. At Singlife, we embrace technology to help Filipinos be confident and in control of their finances. Sign-up now to be the first to know when we launch the Singlife Plan and Protect app.