Managing debt is not an easy task, as it requires consistency and discipline. There is a proverb that is suitable for those in debt “little by little becomes a hill” is very suitable to describe this situation, where debts that initially feel small and light, can accumulate without realizing it.

Facing debt is not a pleasant thing. However, the reality is that almost everyone has been in a situation that requires them to go into debt, whether for urgent needs, education, business, or daily consumption.

Ignoring debt can have a huge impact on your overall financial health. Therefore, it is important to understand the right strategies to deal with and control debt.

In this article, we will discuss some effective ways to manage debt that can be put into practice immediately. By understanding and implementing these steps, you can not only get out of debt, but also build a healthier and more planned financial future.

Also Read: Do you want stable finances? Recognize the Difference between Needs and Desires Clearly!

1. Evaluate the amount and type of debt you have

The first step in how to manage debt is to clearly understand the total debt you have. Write down all your debts, from credit card installments, online loans, to debts to family or friends. Include information such as principal amount, interest, and payment due date.

From this data, you can categorize debts based on their type. For example, consumptive debts such as credit cards and unsecured loans usually have higher interest rates and should be prioritized to be paid off first. Meanwhile, productive debts such as business loans can have long-term benefits if managed properly.

Through this evaluation, you will get a complete picture of your financial condition and can develop the most appropriate management strategy according to your priorities. Never neglect your financial records as they are the foundation of a successful debt management program.

2. Create a Disciplined and Measurable Budget Plan

After knowing the details of your debt, the next step in how to manage your debt is to create a realistic monthly budget. The goal is to ensure that there is a specific allocation for paying off debt installments every month. Prioritize debt repayment before fulfilling secondary needs or other consumptive desires.

Also, determine the percentage of your monthly income that will be used for debt repayment. Ideally, the total installments should not exceed 30 percent of your income so as not to interfere with your basic needs. If it turns out that the number exceeds this limit, you need to cut other expenses or you can also look for additional income.

Don’t forget to set aside an emergency fund so that if something unexpected happens, you don’t have to add new debt. A disciplined budget plan is the key to long-term success in managing debt.

3. Use Efficient Payment Strategies

There are two most commonly used methods of debt management: the snowball method and the avalanche method. The snowball method prioritizes paying off the smallest amount of debt first, while the avalanche method focuses on paying off the debt with the highest interest rate.

The snowball method provides a faster sense of accomplishment because small debts can be paid off immediately. This can provide additional motivation to continue paying off larger debts. On the other hand, the avalanche method is more financially efficient as it helps reduce the total interest payable in the long run.

Choose the method that best suits your financial condition. Both can be equally effective if done consistently and with discipline. Feel free to combine the two or adjust your strategy over time if needed.

4. Avoid Adding New Debts

One of the most common mistakes made when managing debt is adding new debts when the old ones have not been settled. In the process of practicing debt management, it is important to exercise restraint and postpone non-urgent expenses. Focus all your energy and resources on settling your existing obligations.

Use credit cards wisely and avoid using the pay later facility if it is not really needed. Discipline to resist momentary desires is an important step so that you don’t get trapped in an endless cycle of debt. Train yourself to distinguish between needs and wants to make wiser financial decisions.

5. Find Additional Income

If after making a budget and prioritizing payments is still not enough to pay off debt, then finding additional income can be an effective short-term solution. This could be a side job, selling unused items, or developing a hobby into a source of income.

Additional income not only helps accelerate debt repayment, but also provides more space in your finances. Make sure that this extra income is allocated specifically for debt repayment and not used for unnecessary consumption. This is an important part of the actual practice of how to manage debt.

Managing debt is not an instant process, but with the right steps and strong commitment, you can get up and restore financial stability gradually. Don’t feel discouraged if progress is slow, because the most important thing is to keep moving forward and learn from past financial mistakes.

Once debt is under control, it’s time to start thinking about a more secure and stable financial future. One wise step to take is to start investing in digital gold at Treasury.

Digital gold investment is now easier to do, safer, and can start from as little as Rp5,000. Digital gold is suitable for anyone who wants to build long-term wealth without having to wait to be established. Let’s change your financial direction from paying interest on debt to growing future assets with Treasury!