7 Tips For Managing Debt — And Why It’s Not ‘One Size Fits All’

Our debt doesn’t define us, but it can absolutely impact our lives in profound ways. If it gets out of control, debt – and the anxiety it can cause – might even interfere with the things that matter most to us. 

Figuring out how to manage your debt will help you take control of your money and fast-track your financial goals – all with less stress along the way.

There’s a Way To Push Back Against Debt

Ever wish you could just flip a switch and make your debt disappear? 

Well, you can’t. But there are tried-and-true methods out there that can help you fade down your debt. For anyone committed to bringing down their debt, it all starts with some serious soul searching:

• Purpose: Who or what is inspiring you to take control of your debt? Write it down. Keep it close. 
• Strategy: Create a customized plan to manage your debt, including which debt you need to pay off first.
• Honesty: Be honest with yourself about what’s realistic right now. The more grounded in reality your plan is, the easier it will be for you to stay on track.
• Determination: Stick to your plan. Set goals and milestones – and reward yourself when you reach them.

Now, on to the tips.

Tip 1: Look At Your Debt’s Big Picture

Managing debt becomes easier when you can take a step back and see it all in one clear-eyed view.

Start by requesting a free credit report. Your credit report will give you the info you need to create a plan that manages your debt, including: 

• A list of all your debts
• The creditor for each debt
• The interest rate for each debt
• The minimum monthly payment for each debt
• If the debt is unsecured or secured 

You’ll also want to collect your most recent bank and credit card statements to get details on accounts that aren’t included in your credit report or to check something that doesn’t seem right. Like, if a card’s interest rate looks off on your credit report, you can go through your card statements and account details to double check.

The more you know about your debt and where it fits within your overall finances, the more power you’ll have over both. 

Imagine that you’re in a must-win game and your debts are playing for the other team. Learning everything you can about the opposing players can help improve your performance.

Now, let’s come up with a game plan.

Tip 2: Decide Which Debt to Pay Off First

When people face off against their debt, they usually take one of two approaches. They either tackle their lowest balances first (aka the snowball method) or they focus on paying off their highest-interest debts first (aka the avalanche method). 

These two methods have the same goal in mind: managing your debt – hopefully, until it’s gone. But each method has different priorities.

Do you want to pay the least amount of interest possible over the life of your loans? Or do you want to start wiping debt balances off your plate as soon as possible?

Your answer will help you decide which debt to pay off first.

Priority	Purpose	Payoff Method	What This Might Look Like
Pay less interest over the course of paying down debts	Save money in the long run	Avalanche: Pay off your highest-interest account first. Then add the money you’ve freed up in your budget to start paying off the next highest-interest account.	Pay off your 14% interest credit card before you pay off your 5% interest car loan.
Crossing debt accounts off your list one by one	Feel confident that you’re making progress	Snowball: Pay off your debts in order of the lowest balance to the highest balance. Each time you pay off an account, use the money you were paying toward it to pay off the next-smallest debt down the line.	Pay off your $500 personal loan then pay off your $2,000 credit card balance. Finally, pay off your $30,000 student loan.

What to pay off first is your call. It really comes down to what will give you more peace of mind about your financial situation. 

You may start with one method then add to it or replace it with another as your debt situation evolves. 

Tip 3: Pay Your Bills On Time

We don’t mean to be Captain Obvious when it comes to managing debt, but the simplest way to keep your debt from spiraling out of control is to make your minimum payments each month.

If you’re having trouble paying the monthly minimum payment on any of your debts, see if you can make cuts elsewhere in your household budget to free up money for your minimum payments. If you’ve already done that and it wasn’t helpful, debt relief might be your next step (see Tip 7).

If you’re paying one debt down aggressively by putting a lot more than the minimum toward it, make sure you’ve still got enough money to make the minimum payment on your other accounts.

Missing payments can damage your ability to get out of debt in multiple ways:

• Late fees can increase what you already owe.
• The overdue amount piles onto the next month’s balance, and soon your monthly payments become harder and harder to pay.
• Missed payments ding your credit score. So, the next time you need to borrow, you may have to accept a higher interest rate.

Once you’ve landed on your preferred debt payoff method, budget for your monthly payments. To help pay them on time, consider setting up autopay for your accounts. 

Tip 4: Don’t Mess With a Good Thing 

You’ve decided what to pay off first. You’re making payments on time. And you’re managing your debt like a pro. 

But you may be tempted to pay a long-overdue account at the expense of an account you’ve been making payments on.

You may find yourself itching to catch up with long-overdue accounts to keep debt collectors at bay. But if that means potentially missing payments on your other accounts, hold off until you can free up more money in your budget. 

Here’s why: Late payments can blemish your credit history for up to 7 years. Continuing to make your other payments on time can help erase that blemish. But missing current payments to pay off older, overdue accounts will only make the blemish newer and possibly bigger. 

Debt can be a long game. Don’t jeopardize what you’ve been doing right to pay off a long-overdue balance on another account. And don’t let debt collectors tell you which debt you should pay off first. Their profit isn’t your priority. 

This is all about your credit score. Make sure you continue to make minimum payments on your accounts that are in good standing. It can help keep your credit score stable. 

Stay focused. Eventually, you’ll find opportunities to start paying back your overdue accounts.

Tip 5: Pay Off Debt With a Personal Loan 

Low-interest personal loans can save you money while paying off your debt. 

They can be used in two ways:

• Replace a high-interest debt (like a credit card balance) with a lower interest rate loan.
• Consolidate multiple loans or credit accounts into one convenient monthly payment (and possibly a low enough rate to help you pay less interest over time).

Typically, you can select the length of time you’ll need to pay off a personal loan. And you’ve got options, which include 36-, 46-, and 60-month payment plans.

When you get a personal loan from a bank or credit union to put toward high-interest debt, you get a lump sum of money to pay off your credit account or higher-interest loan. Pay off the high-interest debt ASAP! You don’t want that debt and the new personal loan balance on your credit report at the same time. 

Before getting a personal loan, make sure that you’ll get a lower rate. Depending on your current credit score, you may only be eligible for a rate that’s similar to the rate you’re trying to replace. 

And think twice before consolidating low-interest, unsecured student loans. Federal student loan interest rates are usually lower than private loan rates. Consolidating student debt might make the most sense for you if it’s through the U.S. Department of Education instead of a private lender. Weigh your options when considering how to pay off student loan debt.

Tip 6: Do a Credit Card Balance Transfer

A credit card balance transfer lets you move your credit debt from a high-interest account to a 0% or super-low interest account. 

This could help you pay A LOT less in interest, and you get to pay off the debt faster because more of your payment goes toward your principal balance instead of interest charges.

Those 0% introductory interest cards are – as you might have guessed – “introductory.” That heart-pumping 0% rate only lasts for a limited time. 

The introductory period usually lasts at least a year, but not more than two. After that, your interest rate will jump to at least the average credit card rate, which is somewhere between 13% and 18%, but sometimes it can get even higher than that. 

If you think you’ll need longer to pay off your balance, consider a personal loan.

And take note of balance transfer fees, too. There’s always more to an offer than meets the eye. Use an online balance transfer calculator to make sure it’s a good deal for you.

Tip 7: Accept Help – Seek Debt Relief When Needed

If it’s gotten to a point where it feels like nothing you do is working, don’t hesitate to seek out debt relief help. You wouldn’t be the first person to take this smart step. You should always feel good about taking action.

The National Foundation for Credit Counseling can connect you with a free, certified financial counselor who will work with you and help you get on a debt management plan.

For-profit credit counseling is another option. But be sure to thoroughly vet the counseling agency. A good debt or credit counselor will never charge clients before counseling them.

Bonus Tip: Consider an Emergency Fund

Setting aside money each month to help you save for unexpected costs later can help break the debt cycle.

With all the work you’re doing to manage your debt, you shouldn’t have to lose ground if something unexpected and expensive comes up.

Paying for surprise expenses with a credit card or loan can make paying down your debt even more challenging. 

So, as you work hard to pay down your debt, try to leave room in your budget for an emergency fund, too. We know it’s a big ask. But there’s no minimum amount to save. If you can set aside ANYTHING each month, it can pay off down the line. 

It’s the Final Countdown

Managing debt can be stressful. Like struggling with a diet, folks are known to fall off their debt management game plan. But with a realistic plan that’s tailored to your specific situation, managing debt can be your next big win. 

And remember, there’s no shame in debt. 

In fact, taking on debt can ultimately prove to have been a good thing, as long as the money you borrowed helped you accomplish a goal – big or small. The important thing is to keep the balance tipped toward good as much as possible.