Anyone with even a little amount of debt has to manage their debt. If you just have a little debt, you have to keep up your payments and make sure it doesn’t get out of control.
1. Know Who & How Much You Owe:
If you are a debtor then you should make a list of your debts, including the creditor, total amount of the debt, monthly payment, interest rate, and due date. You can use your credit report to confirm the debts on your list. Having all the debts in front of you will allow you to see the bigger picture and stay aware of your complete debt picture.
Don’t just create your list and forget about it. Refer to your debt list periodically, especially as you pay bills. Update your list every few months as the total amount of your debt changes.
2. Pay Your Bills on Time Each Month:
Late payments make it harder to pay off your debt since you’ll have to pay a late fee for every payment you miss. If you miss two payments in a row, your interest rate and finance charges will increase.
If you use a calendaring system on your computer or mobile phone, enter your payments there and set an alert to remind you several days before your payment is due. If you miss a payment, don’t wait until the next due date to send your payment, by then it could be reported to a credit bureau. Instead, send your payment as soon as you remember that it was missed.
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3. Create a Monthly Bill Payment Calendar:
Use a bill payment calendar to help you figure out which bills to pay with which paycheck. On your calendar, write each bill’s payment amount next to the due date. Then, fill in the date of each paycheck. If you get paid on the same days every month—the 1st and 15th—you can use the same calendar from month to month. But, if your paychecks fall on different days of the month, you’ll need to create a calendar every month.
4. Make at Least the Minimum Payment:
If you can’t afford to pay anything more, at least make the minimum payment. Of course, the minimum payment doesn’t help you make real progress in paying off your debt. But, it keeps your account in good standing, which avoids late fees. When you miss payments, it becomes harder to catch up and eventually your accounts could go into default.
5. Decide Which Debts to Pay off First:
Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts.1 Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it’s costing the most money.
Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first.
6. Use an Emergency Fund to Fall Back On:
Without access to savings, you’d have to go into debt to cover an emergency expense. Even a small emergency fund will cover little expenses that come up every once in a while.
First, work toward creating a small emergency fund—N100,000 (Naira) is a good place to start. Once you have that, make it your goal to create a bigger fund, like N200,000. Eventually, you want to build up a reserve of three to six months of living expenses.
7. Use a Monthly Budget to Plan Your Expenses:
Keeping a budget helps ensure you have enough money to cover your monthly expenses. Plan far enough in advance and you can take early action if it looks like you won’t have enough money for your bills this month or next. A budget also helps you plan to spend any extra money you have left after expenses are covered. You can use this extra money to pay off debt faster.
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