Debt Management Tips: Steps Involved in Setting up a Payment Plan

Getting out of debt is much harder than getting into it. That’s a fact. When the shopping experience is over and the excitement of new purchases wears off, what remains is a debit on the bank balance that won’t just disappear.

Getting rid of loan and credit card debt requires sacrifice and consistent effort. This article will give a few tips on how this can be done.

Calculate Total Debt

As part of the plan to become debt free, it is important to calculate the exact amount of debt that needs to be repaid. Use this total figure to work out a payment plan. Once the figure is ascertained, borrowers can either develop a debt solution individually or seek help from a professional company.

Going it alone calls for self motivation and stamina to stay the course. Using a management service, however, could be more suitable as support and counseling is usually provided. Applicants should express caution when choosing a debt management company as not all companies are legitimate.

Draw up a Debt Management Plan

Draw up a plan based on the type of debt (credit card debt, store cards or loans) and rank the debts in order of cost. The interest rate on each type will differ and part of the plan should be to repay the debt with the highest interest rate first. This would free up cash to pay towards the next debt on the list and so on.

Once a plan is in place, then the spending must stop. The idea is to repay all debts, not replace it with additional ones. Reducing spending may call for drastic action such as cutting up all credit or store cards, but achieving a debt free status will be worth it.

Change Spending Habits

The approach to spending should be considered as part of the debt management plan. A few statements of action should be drawn up to tackle spending habits. Examples could be as follows:

  • Determine the amount of money to take on shopping trips
  • Do not spend what cannot be repaid in 30 days
  • Do not purchase on credit…pay with cash or debit card only
  • Set a monthly shopping and leisure budget and stick to it

Setting a plan in place now could save the embarrassment of having debt collection services calling in the future. Debt problems do not have to be overwhelming. It takes a few firm decisions and guided actions but if done correctly, the end result will be a debt free status.