If you are facing debt problems then you need a sound debt management plan, which usually consists of three parts.
Create a Budget
The first thing that you will need to do is to list all your sources of income no matter how big or small. Gather all your payslips, interest payouts, rental incomes, policy payouts etc. You need to know how much money you have to work with so you can avoid overspending.
Now you will need to list all of your monthly expenses, even those smaller ones that you may forget about. Determine how much you spend on groceries, utilities, entertainment, toiletries, subscription services, parking, snacks, eating out or takeaways etc.
Next, you will need to list all the credit providers that you owe money to and how much you have to pay each month. You will be able to find this information in your credit report.
You will need to allocate some of your income to a savings fund that creates interest. This money should only be used in a case of an emergency.
Also, there will be expenses that don’t occur regularly like holidays, a doctor’s visit, a wedding etc. You should have a contingency fund for these type of expenses.
Prepare a Debt Repayment Plan
You will need to have a good plan in place to avoid debt. Once you have your budget, you will have a better understanding of where your money goes each month.
You need to have the goal of paying your debt off as soon as possible by using any additional income or extra cash that you have into paying off your debt. You may find that you will need to make cutbacks in order to pay off debt.
You can focus any extra funds on a high interest debt first as once this debt is cleared, you will be able to free up some money that you can then use to pay off your second largest debt and so on. Or you can start with a small debt to get the ball rolling and tackle your largest debt last.
Stick to Your Plan
You may find that you are not keeping track of your accounts and expenses, which can then lead to unnecessary spending.
You then need to stick to your budget. You should update your expenses daily and review and adjust your budget every month.
You also need to avoid taking on any new debt and focus on paying off the debt that you have.
Paying off debt takes discipline and if you need further help, you can get advice from a debt counsellor and they may assist in creating a debt management plan for you.