Smart Strategies to Tackle Debt with Confidence

Let’s face it—debt can be stressful. It’s a reality that many people face, whether it’s student loans or unexpected medical debt. However, the good news is that a structured approach can ease the burden.

From budgeting techniques to debt repayment strategies, the right tools can give you the confidence to build a strong financial future in a way that is both doable and simple.

Go on a data collecting mission

Before you can implement a strategy, you need to know where you stand with your finances. Start by going on a fact-finding adventure! Take a full inventory of your monthly bills, spending, and debts.

Write down the minimum payments and due dates for every monthly bill. Then, look at any debt that you have and make a note of the balance, interest rates, and terms for the debt. Review the debt transactions for your accounts and see how much you are spending in each category (e.g., food, transportation, entertainment, family expenses, etc.)

The last piece of data to collect is to analyze your tax withholding elections on your W-4. Do you find that you owe taxes every year when you file, or are you getting a big tax refund? If this needs to be adjusted, consider seeking assistance from a tax professional or your employer’s Human Resource professional.

Create a proactive visual budget

Take all that data that you just collected and put it into a spreadsheet or budgeting app, so that you can see it visually in front of you. Make sure that your visual budget shows the pay dates and due dates for each item that is owed.

A visual budget will help you understand what is in the future for your spending. This way, if you need to make any changes you will have time to tweak your spending beforehand.

It will also reveal to you when your finances are tight, or when it will be anticipated that you have leftover discretionary funds to send to a savings account, pay off more debt, and more.

What is your budget telling you?

Once you have your proactive budget ready to go, it’s time to interpret the data. It could indicate that you do not have enough money coming in to cover your monthly expenses, or it could tell you that you have extra money.

If your budget is coming in short, then it is time to track, find ways to open up cash flow, and see if there is a way to cut back on your expenses.

When it comes to tracking, start by understanding your “norms” and then evaluate if there could be a different way to approach your financial behavior . How many times a week are you swiping your debit or credit card? Often, using plastic to pay for items can de-sensitize spending. If this is the case for you, try to use cash for a bit to help you with awareness.

Another behavior to notice is how many times you go to the grocery store per month. You could save hundreds by choosing to visit the grocery store monthly, rather than weekly or daily, to reduce spending.

The next thing to look at is your subscriptions. Review the transactions that pertain to subscriptions, such as apps, gym memberships, and streaming services, and decide if you are getting value from them. There could be some that could be canceled, or put on hold, and the money could be redirected to help pay off debt instead.

Lastly, look at your insurance policies. Sometimes, shopping around every few years to see what prices are out there can help you stay savvy and ensure that you are not overpaying for the same services. This approach can also apply to things like cellphone plans, which we tend to hang on to for a long time once we sign up with a particular carrier.

Review your bill payments

Taking a hard look at the way that you pay your bills could also save you money. How are you physically paying your bills: online, by check, or on the phone? Are you paying your bills on time? If you are struggling to pay your bills on time, perhaps scheduling   would work for you, so that you do not have to stress remembering what to pay and when.

Some people opt to have a separate account for bills than they do for spending money. This way, they have a clear boundary of what money comes from what account. It is important to notice things like late fees, which can be costly and add up quickly. Sometimes, a quick phone call to your credit card and requesting a change in the due date for your payment can save you money by avoiding late fees.

Brainstorm all non-monthly expenses

Yes, there are non-monthly expenses to consider, too. A non-monthly expense is a transaction that can occur outside of your regular monthly bill.

This can include:

• Auto maintenance
• Housing maintenance
• Gifts for holidays and occasions
• Travel and vacation
• Family and personal needs
• Hobbies and seasonal activities
• Medical expenses

These items can be specific to you and your family’s lifestyle. Think ahead to any events that could occur in the future, and make sure to plan for the upcoming expenses.

Consider separate accounts

If you do not have a system to help support your management of money on a monthly basis, one needs to be created. Consider opening an extra savings account to save money for non-monthly expenses. Then, look into opening an account to build an emergency savings fund. This will help you to build a layer of security for yourself before aggressively paying down debt.

If you decide to have a separate account for your bills than from spending money, sometimes it is easiest to make sure that you aren’t carrying a debit card for the funds dedicated to bills. This way, you won’t be tempted to use those funds as they were not intended.

Select a method to pay down debt

As a certified financial counselor, I work with members to meet their individual goals. While this blog reviews ways that you can create a plan and pay down debt, sometimes your plan can look different if your goals differ from wanting to pay off debt.

For instance, if your goal is to increase credit fast, how you approach your debt may be different. The best way to develop a personalized approach is to connect with a financial counselor to customize a plan that is right for you.

If your goal is to pay down debt, I tend to choose the snowball method over the avalanche method.

No, the snowball method doesn’t mean that you get to go outside during a snowstorm and blow off steam by throwing snowballs at your neighbors. While that might sound like fun, the snowball method is a method to pay off debt that is designed to help you build momentum and stay motivated as you pay off each item.

I recommend that you focus on paying off debt only after you have $1,000 in emergency savings. To begin, list all your debts in order of smallest to largest balance owed. Send only the minimum payment due each month to each debt, except for the smallest one. This is the one to focus on and send everything extra that you can monthly.

Continue this method and soon, you may feel a sense of achievement as each balance pays off! Just remember to adjust as you need to. If something comes up, take care of it with your income, and consider putting a pause on sending extra income to debt. Then, resume the snowball method when you can and continue working on eliminating debt.

The snowball method could be just what the finance doctor ordered for your peace of mind. However, it is important to note that everyone’s financial situation and what works for them is unique, and it is OK if snowball isn’t for you.

Whether you choose the snowball method, or a different approach, the key is to start—one step at a time. Confidence in managing debt comes not from having all the answers, but from taking action, and staying committed to your goals. Your journey to financial freedom is not only possible—it’s within reach.