4 Tips on How to Manage Any Debt Size Properly

Debt is something almost everyone has to deal with at some point in their life, and household debt in Canada is on the rise! If it is a small debt, one can pay it off quickly without ending up in financial stress. A substantial debt, however, will take a lot more management to deal with properly. In some cases, more significant debts will have to be dealt with first, while the smaller ones are pushed to the back to ensure that the debtor doesn’t run into too much financial trouble. In other words, proper management of debt is vital to ensure that one can still pay it off without putting oneself in too much financial stress. 

That said, here are four tips on how to manage any debt size properly:

1. Figure Out Which Debts Are More Important

While all debt needs to be paid off, some debts are more harmful than others. For example, credit card debt has one of the highest interest rates of any debts. Within the credit card line, some will have even higher interest rates than others, meaning that they’ll cost more money. This means that, in a typical scenario, credit card debt is usually the first to be paid off.

Some people will go the route of paying off small, easy-to-pay-off debts first, while others will go covering ones with higher interests. This list of priorities will be different for everyone.

2. Set Up An Emergency Fund

An emergency fund acts like a last-minute resort when savings run dry. They’re a solution to avoid getting into debt covering emergency expenses, such as medical emergencies.

To do this, set up an emergency fund when debt is minimum. Start small and slowly build it up to the point that the emergency fund is worth three to six months of living expenses. That way, any surprise expenses won’t force out a debt.

3. Pay the Minimum at Least

If a debt is incurred, the minimum must be paid every month at least. While it won’t help one finish covering the entire debt anytime soon, it will ensure that the debt is nowhere near growing. Plus, keeping up with the payments on time is an excellent practice.

Missed payments only pile bigger and bigger over time. Eventually, it is going to be so large that it won’t be coverable anymore.

4. Set a Budget

With many monthly expenses to be covered, setting up a budget is always good practice. Set enough money aside to cover the expenses and set a little aside for either the emergency fund or savings. The money that’s left can either be spent on things or used to cover debts quicker.

It is also vital to plan. If bills and expenses seem to be a little too much to be covered given the current strategy, lowering the budget can help with that.

Final Thoughts

While getting into debt is something one should try to avoid, getting into one doesn’t mean the end of the world. Debt can be beneficial. For example, borrowing money for investment purposes can allow one to reap massive rewards, not only allowing him or her to cover the debt but to make quite the amount of money for themselves in the process. That said, whether that debt is big or small, management is always important to keep one well away from financial trouble.

Are you in need of help managing your debts? Get in touch with us to learn more about our personal debt relief solutions today.