Five Smart Strategies for Managing Your Debt

Five Smart Strategies for Managing Your Debt

Being in debt is no fun, but it’s not the end of your life, either. Many people who have been in deep debt have managed to climb out and regain control of their financial lives. Sometimes, all you need is the right strategy to get started.

Your first step is to refrain from panicking. Working to put things in order will require taking a moment to breathe and approaching the books calmly and rationally.

Here are five smart strategies for managing your debt and getting you back on a firm financial footing:

1. Assess your personal economy – Know what you have in your savings and checking accounts. Check the value of insurance policies, jewelry, other valuable possessions and retirement plans. You may be able to sell a portion of an annuity, for example, to get cash in hand and repay debts.

Now determine what you owe in short- and long-term debt, and then separate your secured obligations (house, car, etc.) from those that are unsecured (credit cards). This will allow you to have a firm grasp on precisely what you have and what you owe.

2. Prioritize your debts — Begin by tackling the bills that will keep you in your home with the lights on. Pay your mortgage or rent and the utilities. Then identify which debts are so overdue that there is a likelihood they will be sent to a collection agency. Pay them, or at least a portion of them, as best you can.

Manage your credit card accounts next, and pay the minimum monthly amount owed. Avoid paying more late fees and facing increased interest rates as a result of skipping more payments.

3. Contact your creditors — You can’t hide from them, but you can communicate your current situation. See if you can negotiate some sort of deferment, or reduced payment plan on credit cards, car loans, department store accounts, etc. If you have a federal student loan, contact your loan servicer and inquire about alternative payment plans. If necessary, you can arrange for a deferment or forbearance due to financial hardship.

4. Create a realistic budget — Cut down on any discretionary expenses. Limit your purchases to the bare minimum, and communicate the changes with the whole family. It will be easier to maintain these cutbacks if you stop using your credit cards for purchases and pay with cash whenever possible.

5. Consult a debt relief expert — If your debt is truly unmanageable, you may need to discuss your situation with a qualified debt relief company with experience and expertise in debt settlement or debt consolidation. A realistic debt management plan can help you reduce the amount of principal you owe or arrange for lower interest rates and the waiving of late fees and penalties.

Whatever plan you make to manage your debt, stick to it. There is no magic bullet or easy way out of a debt crisis. Stay determined and vigilant, knowing that you can have a debt-free future.

Alanna Ritchie is a content writer for, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College.

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7 Responses to Five Smart Strategies for Managing Your Debt

  1. Great post. Visualizing the end game is so important. Realizing that once you are debt free, you will have $x each month which you were just wasting is such a good motivator!

    Having a realistic budget is something I’ve not done well in the past. I would set ridiculously strict budgets, and then be upset each month when I inevitably went over. Being accurate is more important in the long-term than being strict!

    • It’s especially important to realize that not only are you just not wasting that money, but that you could even earn interest with it by investing it.

  2. Really good planning. And then, once you have it all clear and ready, start paying off debt and be consistent. It’s very hard and sometimes painful, but becoming debt free is really worth the effort and will open so many doors afterward.

    • I think you’re right that really good planning is a must. And then you have to stick to the plan. Consistency really is key, too. It’s too easy to get fired up about a big, huge, ambitious goal and work on it for a couple months. But if it’s not sustainable, pretty soon you’re back to where you started. Something you can manage consistently has a better chance of success in the long run.

  3. Nice Post. I think it’s really important to keep your creditors fully informed when your experiencing hardship, just after the credit crunch I was in a similar position and after I contacted my creditors they were able to reduce my interest rate to zero and lower my monthly repayments considerably. Thanks for sharing these ideas, I’m sure they will benefit lots of people struggling with debt.

    • It’s not fun to have to keep your creditors in the loop, but I think it’s an important part of the process if you don’t want things to get worse.

  4. Excellent. Points 1-3 are fact finding and preparatory. Then we are into Debt Cause and Debt Effect management; both are essential to success.

    Point 3. budgeting, a critical task is associated with Cause. Overhaul your budget entirely; cut spending and expenses. More than reducing outlay and overhead, the goal is to ‘free up’ monies through this process in order to redirect that money towards greater debt repayments. Debt effect refers to the cost of carrying the debt and creditor scenario. Here you need an action plan. Credit counseling may be useful. Use of a third party service is not a necessity. Consumer debt consolidation encompasses three very different approaches: Loans, Settlement and Plans. It is critical that you understand what these options entail, including pros cons and pitfalls.

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