How To Manage Your Debt: Strategies & Tools

Even if you’re financially responsible, life’s unpredictable nature can sometimes catch you off guard, at times making it dangerously easy to fall into debt. Discover how to start managing your debt with these tips and tools.

Debt Strategies

There are strategies to help you get back in control if you’ve found yourself falling behind or growing impatient with your debt payments.

• Debt Snowball Method: With this method, you start small and work your way up. Begin by paying off your smallest debt first. Then, take the amount you were paying for that debt and pay it toward the next smallest debt, and so on until everything is paid off.
• Debt Avalanche Method: Just like an avalanche, you knock out the big things first and then work your way down. Focus on paying off your highest interest rate first, then roll those funds into the next highest, and then the next.
• Debt Consolidation: Debt consolidation allows you to combine all of your debts into one payment by taking out a new personal loan, ideally with a lower interest rate, and using it to pay off your debts. Be careful though, sometimes you could end up being in debt longer because of the new loan and thus paying more interest overall.

Town & County’s Banzai Get Out of Debt Coach can help you make a customized plan to pay off your debt and learn more about what some of these strategies could look like for you.

Tips to Get Out of Debt

Beyond the above debt strategies, there are other adjustments that you can make to your approach to debt and daily spending habits that can make a large impact.

• Reduce Expenses: The simplest thing you can do, if you act quickly, is stop spending on anything that isn’t essential. Since debt doesn’t go away by itself, the faster you stop adding to the problem the better. You might also consider how to reduce your expenses in the short-term, for example, by subletting your apartment or renting out a room in your home until you can get your debt under control.

• Pay More Than Your Minimum Balance: Adding even just a little bit of extra money to your monthly payment can help pay off your debt sooner and pay less overall. Just how much of a difference can it make for you? Use the Debt Payoff Calculator below to find out.
• Negotiate With Your Creditors: If you can’t afford your minimum payment, ask your creditors to rewrite the terms of your credit agreements so that your bills are easier to pay off. This often means making smaller payments over a longer period of time, which does mean you’ll end up paying more interest and therefore increasing the overall cost of resolving debt. But that’s usually a better solution in the long run than having to default or declare bankruptcy.

Planning Ahead

One of the smartest things you can do when things are going well is to establish an emergency fund as part of your savings plan. You should aim to set aside enough money to cover at least three to six months of living expenses. That way, if an unforeseen event puts a drain on your finances, you’ll have some back-up funds to help see you through. Check out the Emergency Funds article to learn more.

If you would like to talk with someone about paying off debt, developing a debt repayment create a workable budget or have other financial questions, contact us at info@tcfcu.com, or call 800.649.3495.