Personal debt can be daunting to manage, especially because it’s often hard to know where to start or how to approach it. Even a small amount of personal debt requires some planning and forethought to handle; not to mention, it can be challenging to juggle payments and budgets in order to reduce your personal debt.
SkyCap Financial, one of Canada’s premier personal loan providers, has a number of insightful guidelines to share regarding personal debt and how to manage it. In fact, as part of their service, the company, which is based in Kingston, Ontario, developed SkyCap University, a financial literacy course offered to their customers that promotes financial literacy and provides guidance on debt, budgeting, home ownership, credit, and similar topics.
Managing personal debt
Personal debt can come in many forms--loans, credit card bills, mortgage payments--but the following techniques and guidelines will help you create a plan for managing your debt.
Organize your debts and figure out how much you owe
Make a list of your debts, including who you owe and how much. You can also organize your list of debts into categories that show which expenses are fixed per month (like mortgage payments, or rent) and which fluctuate (groceries, entertainment, etc.). Having all your debt laid out will help you look at the big picture and become more aware of spending patterns and necessary expenses.
Large loans like mortgage payments, car loans, and other loans, such as SkyCap Financial’s short term loans, often offer automatic payment programs that can help you stay on track with your payments.
Give yourself some extra cash to be able to make payments
One of the first priorities of managing your debt should be establishing a budget. After you’ve made a list of your debts, you should also look at what you have in terms of income. If you’re spending more than what you’re receiving in income, it’s time to make some adjustments. To manage your debt, you have to stop increasing it.
Once you can create a positive gap between your expenses and your income (where more money is coming in as income than is going out as expenses), you should work to increase it.
Prioritize your payments
There are two popular debt repayment techniques that can be used to manage and decrease your personal debt: the debt avalanche technique and the debt snowball technique. Choosing the one that’s right for you will depend on your available finances and your personal preferences.
The debt avalanche techniques involves prioritizing the debt that has the highest interest rate and working to pay that off. This technique can help you effectively decrease the overall size of your debt and reduce your monthly interest payments.
The debt snowball technique involves prioritizing either your smallest debt or the debt with the lowest interest rate and paying that off entirely. These debts are often credit cards or short-term loans, like SkyCap Financial’s nine-month loan term. The debt snowball technique can be a great way to eliminate a number of small debts and build your confidence to tackle some of your larger or more complex debts.
The key to eliminating debt is to stay focused on your goal. Make sure you’re paying your bills on time and making the minimum payments. Stick to your budget once you set it. The guidelines above will help you manage your debt and save money. You can learn more at SkyCap University, which is available free to SkyCap Financial customers.
Published by knorr kendra