Every person with debt, even a meager amount of it, should take steps to manage it with proper care. If one has a little amount of debt, then they must keep up with their payments and see to it that the debt does not get out of control. Kavan Choksi points out that in case someone has multiple types of debt like mortgage, credit card bills, and card loans, then they have to be proactive about paying the debt charging the highest interest first, while putting away money for the other payments.
Kavan Choksi offers an insight into managing debt smartly
Taking debt can be important to achieving many important milestones in life. For instance, in case a person is unable to buy a house with their savings, they can always take out a mortgage. To make sure that these debts do not become a financial burden, they have to be managed in a smart and systematic manner.
Here are a few steps one can take to manage their debt:
- Know the debt: One firstly has to make a list of all their debt, including the creditor, total amount of the debt, monthly payment, due dates, and interest rates. People can make use of their credit reports to confirm the debts on their list. Having a comprehensive list of debt in front would help people to see the bigger picture and stay aware of the payments they must make.
- Pay bills on time each month: Late payments make it harder to pay off the debt. After all, one has to pay a late fee for each payment they miss. Hence, in case they miss two payments in a row, then the finance charges and interest rate shall increase. People can use a calendaring system on their smartphone or laptop, enter their payment details and set an alert to get reminded of the payment to be made before their due date. In case one does miss a payment, they should not wait until the next due date to send their payment, as by then, it might have been already reported to a credit bureau. Payments should be made as soon as one remembers that it was missed.
- Create a monthly bill payment calendar: Using a bill payment calendar help people to figure out which bills they should pay with each paycheck. One should write each bill’s payment amount next to the due date on their calendar. They must subsequently fill in the date of every paycheck. In case a person gets paid on the same days every month, then they can simply use the same calendar from month to month.
- Make at least the minimum payment: Even if a person cannot afford to pay a major sum of money towards their pending debt, they should at least make the minimum payment. Even though the minimum payment does not necessarily help make real progress in paying off the debt, it does keep the account in good standing, which avoids late fees.
In the opinion of Kavan Choksi, paying off the credit card debt first is usually the best strategy as it tends to have higher interest rates than other debts. In case a person has multiple credit cards, the one with the highest interest rate must get the priority on repayment.