This is a sponsored post. All opinions regarding debt management are 100% my own.
Debt affects everybody, from average people to the rich and the wealthy. And while a select few may be able to wait until their next movie or business sale to wipe out a lot of debts, that’s not always a possibility for real people like you and me.
No, what we need to do is to have some solid tactics that will work for us, not against us, and using the resources we have at our disposal. With that said, let’s look at some debt management tactics for real people.
Debt Management Tactics For Real People with Truman Advisors
Create an Emergency Fund
No matter what financial state you are in, consider creating an emergency fund before doing anything else. I suggest that you build up to $1000 in an account before you start trying to use any other debt tactics. Otherwise, those life emergencies can wreck the financial monthly plans you have. I’ve seen even the best-laid financial efforts crumble like a house of cards when unexpected expenses come knocking on the door.
Please note that I am talking about $1000 in cold, hard cash that you can get to quickly but not overly conveniently. Let me say this just once: having $1000 credit on a card is NOT an emergency fund. Any tactic about debt that leads you into more debt should be considered a bad tactic. It is poor planning at best, so don’t do it.
Use a Monthly Bill Calendar
As we said in the last topic, life isn’t perfect, and there will be things that come up along the way. When something does strike at your financial situation, you may find yourself having to scramble and reorganize your payments. By creating a monthly bill calendar, you have a virtual map of everything that is due and when you need to pay it.
It might be that instead of being late on a payment because of a more pressing financial need, you can restructure payments and manage to stay current. That bill roadmap pays for itself at times like this. And when you go to create it, go ahead and make it for multiple months.
This is because your pay period will probably not fall at the same time of the month every time. Payments that are due at the first of the month may not wait until you get the first paycheck that month, and you need to account for that when restructuring. Put that bill calendar to work for you.
Take Advantage of Long Months
If you get paid every two weeks, you will find that an occasional month will have a third pay period in it. While the entire paycheck won’t be yours to spend – it just doesn’t work that way – you may still find that part of it can be converted into discretionary funds. Take advantage of that fact, and use it to pay down some of your debt.
You may be tempted to use that small windfall for uses other than debt, but stay strong. This is money you weren’t really expecting, so make it count as if it never was there. In the long run, your finances will thank you for the boost. Just make sure to apply it to the debt that will give you the best return for your effort. Which brings us to our next topic…
Decide Which Bills To Pay First
You will want to pay off debt as quick as you can, even if it seems to be a snail’s pace at times. But by focusing your effort on a single bill, you can usually manage to eliminate it quicker than by regular payments alone. And that leads to the question, which debt do I focus on first?
This is an area where experts tend to have different opinions. Technically, the credit card with the highest interest is costing you most, especially if the balance is higher than the others. It would seem a simple conclusion to pay on that debt. But hold on, it’s not that simple. In fact, I encourage a different approach,.
- Pay on the bill with the lowest balance first. By focusing on the lowest bill first, you can work to eliminate it quicker than the others.
- When that debt is paid, take that focus money you were paying on it, along with its regular payment, and apply it to the one with the next highest balance along with its regular payment.
- In this manner, you are creating a growing debt payment effort without costing you anything extra out of your paycheck that you weren’t already paying.
- And it continues to grow.
This is why many financial experts call this approach a debt snowball – just as a snowball rolling down the hill, your repay efforts continue to grow until you can knock out your debts. And then, glad to say, that big snowball each month will be all yours to apply towards other needs or ways to improve your life. All this was possible thanks to a little advance planning. And speaking of planning…
Create a Monthly Budget
You’ve heard the saying: those who fail to plan, plan to fail. Let me tell you, nowhere is this truer than when it comes to debt management tactics. A good budget is your roadmap to financial health. If you do it right, a monthly budget will work in tandem with your bill calendar we created above.
The bill calendar defines what you need to pay and its schedule. A good budget will use this invaluable tool to plan out your financial actions to take in the short and long term.
And just as we said for the bill calendar, a good budget will look beyond a single month. In fact, the name “monthly budget” doesn’t fit what it needs to do since it’s hard to plan a given month without taking into what’s just around the corner.
For this reason, let’s strike the name “monthly” from our budget. Instead, call it something realistic and applicable. You can say “life budget”, “spending budget”, or even Bob. Just don’t fall into the trap of thinking that the planning ends at the end of the month.
Real people need real tactics when it comes to debt management with Truman Advisors…
It doesn’t have to be an elaborate plan, nor does it need to be exceptionally clever (and I would probably even argue against that since being clever often gets people in debt.)
Instead, even the best tactics need to be used purposely and consistently before they will have any impact. In fact, that is my last tactic, and I am confident that it is my best one – be consistent. Keep your oar moving in the water and you’ll find yourself at a new financial place before you know it.
When he is not writing on his wife’s blog or has his head buried in software code, Greg Chaffins can be found celebrating nerdy things on his own website, NerdBeach.