Did you know that three out of four Canadians suffer from outstanding debt? If this includes you, then you know that you’re not alone.
And you don’t have to tackle managing debt alone either. Don’t worry if you’re unsure where to start because you’re in the right place. Keep reading to learn all you need to know about debt management.
What Does Debt Management Mean?
Debt management is the process of paying down your debt through budgeting and planning. You can do this in several different ways and through various companies; we’ll walk you through them all.
The goal of debt management is to pay down and eventually eliminate your debt. You’ll need a plan that you can create yourself or consult with a mentor to help you through it.
Benefits of Managing Debt
Unfortunately, debt is a way of life for most people in today’s society. However, it can also reach a point where it starts to control your decisions and choices. At this point, it’s no longer a tool that can help you get a better car or buy a house.
If you have substantial consumer debt in credit cards, personal loans, or other unsecured debt, you can benefit from paying it down. Some of these benefits include:
- Reduce the amount of interest paid
- Reduce the mental and emotional burden of remembering due dates
- Improve your credit score
- Increase the amount you have for fun spending
As you can see, managing your debt has many benefits, including building toward financial freedom. But it can be hard to know where to start. We’ll tackle that in the next section.
Steps to Getting Rid of Debt
Unfortunately, there isn’t a magic pill to get out of debt. You didn’t get into debt overnight, and you won’t get out overnight either. But we’ve put together an easy-to-follow step-by-step process you can follow to manage your debt.
1. Determine Where You Stand
Before you jump into any goal, you first need to assess your starting point. And paying down your debt isn’t any different. Take the time to sit down with your bills to see where you currently stand.
Write out every single bill from your electric bill to your credit card and any money you might owe your sister or grandma. Write it all down so you can fully see your situation.
Be sure to include how much you owe in total, your monthly payments, how much interest is, and if you’re behind or current. This information will help you make crucial decisions in later steps. For now, you’re just writing it out so you can see the big picture.
2. Write Out a Budget
Next, you need to create a written budget. If you’ve never done this before, it might take a while.
Start with your income; write out everything and add it up for each month.
Then you need to know how much is going out each month. Write out all your regular monthly expenses from your rent or mortgage all the way down to your Netflix charge each month. The goal is to determine if you’re spending more or less than you make each month.
That is the simple process of creating a budget. For some people, this might be easy if you get a set salary each month. For others, it might be harder if you have a fluctuating income due to tips, commissions, or freelance income.
3. Pay All Your Bills on Time
Now that you know where you stand and have a written budget, it’s time to get started. Your first step is to pay your fixed monthly bills on time. This includes your rent, utilities, and car payments.
Some of these bills, such as your utilities, won’t report to your credit score, but you need to stay current, so you can move on to the next step. At the very least, make sure you pay the minimum amount on each bill on time every month from here on forward.
4. Pay off Old Debt Including Collections or Charged-off Debt
This can be the hardest step for many people. We’ve helped thousands of hard-working clients tackle their debt and pay it off for good.
Tackling your old debt can become burdensome to track down and verify. That’s why it’s helpful to work with a professional such as KingCash. We can help you with this step so you don’t have to spend your lunch break or weekends doing it yourself.
Best Debt Management Tips
Managing your debt will take time and commitment. Here are some tips to help you get through the process.
1. Do Your Homework
Just because a company says they’re non-profit doesn’t make them free or even a legitimate business.
Some red flags to watch out for include:
- Grandiose promises to wipe out all debt, regardless of the type
- Assurances that they can solve your debt problem quickly, debt management takes time
- Asking for large sums of money upfront, responsible debt management involves small monthly payments over time
You need to research to ensure the company you choose to work for has your best interest in mind.
2. Leave Bankruptcy as a Last Resort
People often come to us here at King Cash thinking that they need to file for bankruptcy. This may seem like a fast and easy solution, but we assure you it is neither.
When you work through the process of paying off your debt, you learn essential skills like setting up a budget and paying your bills on time. These skills will help you stay out of trouble long after you’ve paid off your debt.
Crush Your Debt Once and for All
Too many people suffer from crushing debt. However, there is a solution to managing debt and living a better life. Follow these steps to ensure you’re tackling your debt the right way.