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Debt Management: The First Step to a Financially Stable Future

In a world of dizzying tuition costs, most professionals now start their careers beneath a mountain of student loans making debt management seem impossible. It’s also common to accumulate other forms of debt while keeping up with ever-rising cost of living. Medical debt from unfortunate health challenges or personal debt from other types of loans can stack up after misfortunes. Fortunately, you don’t have to live with debt forever, even if it seems like too much to pay off.

With careful planning and the right debt resolution services, you can not only erase your debts, but also build a sound financial foundation for prosperity in your life after debt.

Here's What You Need to Know

Planning for Your Financial Future

What many people don’t realize is that you can set yourself up for a strong financial future even while you pay down debts. Financial health isn’t just a positive or negative number. It has to do with the way you manage your money, including your habits, savings, investments, and your rising credit score.

You can find yourself in a better place financially, building that strong foundation, long before your debts are fully repaid. Making room in your budget for debt repayment and finding the best strategy to handle your debts can also prepare you for success after the weight of that debt is lifted. When you reach life after debt, you will discover that you are better at saving, that you handle your money wisely, and that you suddenly have extra income ready to build your future using your carefully developed financial skills and debt management strategies.

With that bright glimpse of the future, let’s start at the beginning.

Always Do the Math for Debt Management

Build a Budget with Room for Debt Repayment

The first step in building your financial foundation is to create a budget with room for debt repayment. Paying debts even a little at a time can slowly chip away at even the largest debts. Attending to your debts can also assure creditors that you are moving in the right direction, and they will typically ease up the pressure when you have shown intent and ability to clear your debts over time.

Building your budget begins by laying out your income and all your expenses to make sure they balance out. Rent, bills, and groceries are your essentials. You could cut everything else, if you had to. However, the smarter option is to reduce your overall costs by cutting what you don’t need and finding the most affordable versions of everything else. 

The key is to make room in your budget for debt repayment, ideally, at least $100 a month. 

Build Your Debt Management Strategy

Create a Steady Debt Repayment Strategy

Once you have some money set aside each month for debt repayment, build your strategy. Determine which debts are the most urgent and which ones you can knock out the fastest. Paying small debts first reduces the total number of debts (and creditors) you need to worry about, while addressing larger debts can ease the pressure and open the door to negotiation.  Experian’s article, Avalanche vs. Snowball, Which Debt Repayment Strategy is Best, can help you choose the best plan for you.

Set a time each month to pay your debts and keep that schedule. Dedicate your full debt repayment budget, whether you split it between debts or pay off one debt at a time.  

Here's What You Need to Know

Improve Your Credit Score as You Reduce Your Debt

While you are carving down your debts, you should also focus on your credit score. Debts aren’t the only aspect of your credit report, and there are steps you can take to improve your financial prospects over the months or years that you’ll need to become skilled at debt management .

Take out a low-limit credit card that gives cash back and use it for routine expenses, then pay it off each month. When appropriate and possible, buy a car and keep up with the installment payments. Use a modest diversity of credit types and always pay them back quickly – by never borrowing or spending more than your budget already includes.  

This will create a long and diverse credit history to boost your credit score beyond your debts and leave you with an overall higher score when your debt is finally gone.

Check Your Credit Report

Wrap Up Your Debts Neatly as You Pay Them Off

If you keep up this strategy, your debts will slowly but surely disappear.  As your financial prospects improve through promotions and smart money management, that rate will accelerate as you are able to pay more on your debts each year.

When closing a debt, make sure it is fully resolved, then check your credit report to ensure the debt is removed and your credit score takes that boost.

Build a Strong Foundation

Transition Debt Repayment into a Savings Strategy

What should you do with your debt repayment budget when all your debts are gone? Start saving. You might already have a savings account, if saving was part of your existing budget. But now, you have an entire chunk of your budget and income that no longer needs to go toward debt. Now is the perfect time to build your nest egg and create the savings account you’ve always wanted.

While you should reward yourself for a job well done, most of the money you’re no longer putting toward debts can be poured into your savings account to see your financial foundation truly take shape.

Now You are in Charge

Embark on a Bright Financial Future

If all has gone according to plan, you will reach a point where you are debt-free, have a high and rising credit score, and a growing savings account. From here, your financial future is yours to command. Will you save up to buy a house? Invest in a few long-term stocks? Build a retirement fund or create a trust fund for your children? It’s entirely up to you. Your financial foundation is strong, and the next step could take you anywhere you want to go.

Here's What You Need to Know

Begin Your Financial Future with DebtBlue

For many, the first step toward a strong financial future is debt management assistance. At DebtBlue, we provide opportunities for our clients to resolve their debt through consolidation and manageable payments while getting rid of pressure from their creditors. We’ll help you build that steady debt repayment budget you need to pay off student loans, medical debt, credit card debt, and more so that you can turn your debt repayment plan into a financial future in your life after debt. Contact us today to consult with one of our Certified Debt Specialists today.