How to Manage Your Debt in a Smarter Way

May 20


S. Vishwa

S. Vishwa

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1.Do your homework before taking a loan. It's important to calculate your debt coverage ratio before you apply for a loan. 2.Start investing some part of your income in stock market.It will help you to get interest on it which can add to your income.


Everyone with little bit of debt have  to manage their debt. They have to make sure they keep up with their payment and pay it off as quickly as possible and if you have large amount of debt to be paid you need to pay it diligently and need to take more efforts to pay it off.

For example when I was in my graduation days,How to Manage Your Debt in a Smarter Way Articles I often had financial constraint during that days. Good thing I had gotten my credit card during graduation days. I used to have good credit rating. After studying a semester abroad I had taken a loan from bank to pay it off quickly. So I had drawn significant amount of  credit used it to pay off balance and therefore used it responsibly. Also the way the economy is heading towards inflation is also difficult way to save money as basic goods have  become expensive so thinking about buying luxury goods is out of box.

A very common observation in human behavior is that we tend to prefer superior choices over inferior ones.Its human tendency to create an unnecessary expenditure which can lead to loss of debt(money).

So after going through it and facing it I finally found the ways to manage debt. There is also an good debt and bad debt.

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Good debt is debt which is spent on education, buying a home and buying something that helps you earn income. This is helpful in long term. Whereas bad debt is a debt which may cost you a lot of money and not leave you financially better off. Eg: for items that do not grow in value, like a holiday or car or paying bills or covering everyday expenses.

Following are the target or logical ways in which we can manage your debt:

  • Decide which debt to pay off first: decide which debts to pay off first like credit cards debts because they carry high interest rates than any other debts.
  • Create a monthly bill payment calender: it is very important to create a monthly bill payment calendar as you where your money is being spend on and also you have a track on it. On your calendar, write each bill payment amount next to due date. Then fill in date of each paycheck
  • Build an emergency fund in case you are out of cash: building an emergency fund is very important as it can help you pay or fall back on unwanted expenses.
  • Consider cashing in life insurance: cashing un your life insurance is an important debt pay off strategy because it will give you chance to pay of lower down larger amounts of debt quickly.
  • Make more money: making more money is also one of the good ways to pay off debt as quickly as possible. You should always make ways to increase your income to pay of debt as soon as possible. Whether working part-time or full time, thinking of starting to earn money for few months to apy debt as soon as possible.
  • Make at least the minimum payment:if you cant afford to pay anything, atlaest try to make the minimum payment. Off course the minimum payment won’t make any real progress in paying off your debt. But it keeps your account in good standing, which avoid late fees.
  • Sell items for cash: selling items for cash eg: second hand items will fetch you some cash which will help you gets ome money through which you can pay off your debt.
  • Pay off collections and charge offs: you can pay on your debt as much as you can afford.when you have limited funds to paying debt focus on keeping your other accounts in good standing.
  • Invest wisely: when investing in anything, invest wisely. Research on whaever you are investing and then make a budget plan oh how much you can invest. also avoid investment that require high return as these investments are very risky. Eg:penny stock and junk bonds.
  • Control monthly expenses at home: controlling or minimizing the expenses is one of best ways to reduce expenses and pay off debt eg: uncessary shopping or subscriptions can lead to huge expenses monthly.
  • Limit debt: limit the amount of debt you can take on. One rule of thumb you should always apply that is monthly payments on your debt should not exceed 20% of your homestay.
  • Credit counseling: credit counseling agencies are the organizations usually non-profit , who can help manage your finances and debt.

While some of these steps may seem small- like avoiding unnecessary expenditure also new debt  and building emergency fund they’re important for building a solid financial foundation that allows you to pay off debt successfully. So this is how you can manage your debt and pay off as soon as possible. Clearing off debt is one of the best ways to live a life at peace and also good way to grow in your life. And always follow 50-30-20 rule . 50%to cover basic needs, 30% to cover wants and 20% to invest or clear off the debts.One more thing I can say that Savings are essentially expenses that not yet occurred.As savings are funds that saved for future purpose, it can only save you from going bankrupt or out of cash but wont last for a life time.That’s why experts say savings do not make you rich but investment does. Studies have showed that people tend to spend less when paying with cash as opposed to paying with credit cards. Also by paying debts on time it will gain you confidence also have control on your life.

Also not paying debt has some dreadful consequences, which will affect your mental health and also cause lot of health issues. A 2010 study by’ The American Psychological Association’ money  was one of the top reasons for stress.16% respondents also say that there sleep had impacted the most by their financial situation.13% respondents had said that stress was impactimg their role as a parent.14% respondents indicated they felt significant stress relating to their job. . Well in the end we can say managing your expenses and investing not only make you rich but also make you build wealth .