Creating a Strategy for Personal Debt Management

Analyze Your Spending

To create your unique debt management solution, you first need to take a look at your spending habits. You can use an old-fashioned method, like pen-and-paper, or you can use an app. There are many different apps for your smartphone that can keep track of your expenses and help you with budgeting. Track your spending for a couple weeks, or months if you can. This will help you get a good picture of what your spending looks like.

Categorize Your Expenses

While you’re tracking your expenses, assign them to different categories. Choose a handful of categories that are essential to your daily life. Try to keep this simple so you are able to see exactly where the majority of your money is going. Examples of categories are groceries, transportation, rent, and entertainment.

Create a Budget

Now that you have your categories all listed out, the next step of a debt management solution is to determine where you can make cuts. The main goal here is to get your spending below your earnings so you can stop accumulating debt. Can you cut down how much you’re spending on groceries? Do you need to have that subscription service? See what you can and cannot manage without and test your budget to find the perfect fit. You can be as meager or as strict as you want with your budget, but remember that the more you cut, the more you can use to pay down your debt.

Minimize Your Credit Lines

If you have multiple lines of credit open, choose one to keep in your wallet. While you’re paying down your debt, you don’t want to accrue more debt, so keep your other cards out of reach. You don’t want to close any accounts as this will negatively affect your credit score. Pick a credit card with the largest credit line or most perks – IE low interest, miles, points, or cashback – and keep it for emergencies.

Know When to Ask for Help

While a debt management solution like this can help get you started, there are times when you need a professional to step in and create a personalized plan tailored to your needs. We have years of experience helping people in both the short and long term to manage their debt and learn healthy financial habits. People get in over their heads when they overestimate what they can handle. You are not alone.

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