Where Should I Start My Debt Management?

Debt management can be an overwhelming process for anyone, especially young adults and recent college graduates. Sometimes taking the first step in a new direction can feel like an insurmountable challenge, but once you break down the steps it may become a much more manageable task. When you're able to manage your debt properly it can be a freeing process that may open you to new financial opportunities.

The Process of Debt Management

While the complexity of debt management often depends on each situation, one of the important components of debt management is having a plan. It's important to note that this plan should be tailored to your needs and in severe cases may need to be discussed with a professional, but there's always at least a place to start. Here are five tried and true steps that may be helpful in your debt management journey.

Step One: Organization

The first step in managing your debt should be identifying all current sources of debt. Make a document or list out on a sheet of paper any loans you currently have. For each loan you should state the principal, minimum payment, interest rate, and term so that you can quickly do any simple math you may need.

Step Two: Summation

Add up all of your debt, so you have a clear vision of exactly what you owe. From here, you now have a more precise outline of your debt and can begin managing your finances without fear of being blindsided by an unexpected debt payment.

Step Three: Integration

Start to look at what payments you can afford to add to your budget. It's okay if you have to do a little shifting, but it's essential to be mindful of how this affects your monthly finances because it can ultimately impact your lifestyle.

Step Four: Prioritization

You should aim to target high-interest loans first. These loans can snowball the quickest over time if left unmanaged, so they hold the highest risk towards your financial well-being. As you continue to eliminate these loans, you will have more and more room in your budget to work with, and managing your debt will become easier.

Step Five: Advocation

Call any creditors you owe money to and negotiate whether you can lower your interest rates on the credit cards you hold. Once you've done that, halt spending on those cards and focus on paying them off first.

Start Sooner Than Later!

Although the process can seem daunting at first, these five steps are commonly practical enough to help you move towards having less debt. If you are able to utilize this process but still feel like you don't have good control over your debt, the next step you may consider is to enroll in a debt management plan.