6 Ways to Manage Your Debt

Debt is when you owe money to someone else. Debt can make you feel bad and stop you from doing what you want. But don’t worry! You can pay off your debt and improve your credit score. Your credit score is a number that shows how well you manage your money.

A higher credit score can help you get cheaper loans, insurance, and rent. This guide will show you six ways to pay off your debt and be more free with your money. Here are some facts about it

People who have no debt are happier with their lives than people who have debt.

More than half of the people who have debt are ashamed of it.

The type of debt you have can affect how you feel. People who have medical debt are less happy than people who have mortgages.

People who get their first credit card when they are 21 to 24 years old have the most credit card debt.

Debt is common in low- and middle-income countries. They owe more money than they make.

Debt can be used for good things, like buying a house or starting a business. But it can also be risky.

6 Ways to Manage Your Debt

Step 1: Create a Debt Inventory

You need to know a lot about your money to control your debt. Debt is when you owe money to someone else. The first thing you need to do is find out how much debt you have. Get all the papers that show how much money you borrowed and who you need to pay back. Write down each debt, like this:

Here is an example of how to do some paperwork.

Creditor Type of debt How much you owe How much you pay each month
Bank A Car loan $10,000 $300
Bank B Credit card $5,000 $200
Store C Store card $2,000 $100

This will help you see how much money you have and how much money you need. This will also help you plan how to pay off your debt faster.

Utilize budgeting apps like Mint or Personal Capital to seamlessly track your debts and visualize your progress.

Step 2: Choose Your Battleground

Some debts are worse than others. You need to pay them off first. This will make it easier for you to pay off all your debts and spend less money.

Some ways to decide which debts to pay off first are:

1. The interest rate

This is how much extra money you pay for borrowing money. The higher the interest rate, the more money you lose. You should pay off the debts with the highest interest rates first.

2. The balance

This is how much money you owe. The lower the balance, the faster you can pay off the debt. You can pay off the debts with the lowest balances first. This will make you feel good and motivate you to keep going.

3. The type

Some debts are good for your credit score, like a mortgage or a student loan. These debts can also have tax benefits. Other debts are bad for your credit score, like credit cards or payday loans. These debts can also have fees and penalties. You should pay off the bad debts first.

4. Debt Snowball

Tackle the debt with the smallest balance first. This provides quick wins and a sense of accomplishment, potentially boosting your motivation to continue.

Ways to Manage Your Debt

Step 3: Craft a Budget

Budgeting is when you plan how to use your money. It is not about giving up things you like. It is about spending your money wisely and saving some for later. Write down how much money you make and spend in a month. See where your money goes. Make groups for your spending, like food, rent, clothes, etc. Find out what you can spend less on. Make a budget that shows how much money you need for important things, paying off debt, and having some fun.

To help you with your budgeting, answer these questions:

  • How much money do you make in a month?    (Enter a number)
  • How much money do you spend in a month?    (Enter a number)
  • How much money do you save in a month?       (Enter a number)
  • What are the three things you spend the most money on? (Choose from the list below)
    • Food
    • Rent
    • Utilities
    • Transportation
    • Clothes
    • Entertainment
    • Education
    • Health
    • Other
  • How much money do you want to save in a month? (Enter a number)
  • What are some things you can spend less on? (Write your answer)

Now is the time to analyze your sheet and finalize your saving plan.

Utilize the 50/30/20 rule – allocate 50% of your income to essential needs, 30% to discretionary spending, and 20% to savings and debt repayment.

Ways to Manage Your Debt
Ways to Manage Your Debt

Step 4: Seek Better Terms

Talk to your creditors, tell them about your situation, and ask if they can reduce your interest rates or monthly payments. Some lenders might be willing to help, especially if you show that you’re committed to paying back what you owe.

Also, think about combining all your high-interest debts into one loan with a lower interest rate. This can make it easier to pay off and might save you money. 

Step 5: Pay More Than the Minimum

When you only pay the minimum amount due, it takes longer to pay off your debts. Try to pay more than the minimum whenever you can. Even small extra payments can make a big difference. They’ll help you pay less interest overall and get out of debt faster.

Take a look at your budget and figure out how much extra you can comfortably afford to put towards paying off your debt. Then, allocate that extra amount to your outstanding balances. It’s a smart move that can save you money and bring you closer to financial freedom.

Utilize windfalls like tax refunds or bonuses to make lump sum payments towards your debt.

Step 6: Monitor Your Progress

Dealing with debt is like a long race, not a quick sprint. Keep an eye on how you’re doing and celebrate when you hit important points. Seeing your debt go down, and your credit score go up, can encourage you to keep going.

 Give yourself small treats when you reach your goals, but always remember your big financial plans for the future. 


Getting rid of debt and improving your credit score might feel overwhelming, but it’s doable. Follow these six straightforward steps to reach financial freedom. They’ll help you handle your debt, pay it off smartly, and understand credit better.

 Stay consistent, celebrate small wins, learn from mistakes, and keep your eyes on the big picture. Taking charge of your finances now sets you up for a brighter future, where a good credit score gives you the freedom to chase your dreams confidently.



I'm Asif Khan, just your regular blogger and content creator guy next door. In this little corner of the internet that I call my own, we're going to explore all the cool ways you can make money online.

Sharing Is Caring:

Leave a Comment