Personal debt doesn’t need to be daunting. Breaking it down into smaller, manageable steps can make the process less overwhelming and more achievable.

The first step in managing your debt is to understand who you owe, how much you owe, and the interest obligations for each loan, credit card, or other type of credit account.

Checking your credit report is a great start, it gives you a summary of all money owed. This knowledge provides the foundation for creating a successful debt management plan. 

Here are five top tips to help you manage your debts:

1. Check your credit report

Your credit report records your credit history; it includes a summary of your debts, repayments, and any defaults. You can get a copy of your personal credit report for free from Centrix. If you’re not familiar with the report, here’s a helpful guide to understanding your credit report. 

2. Make a list of your debts and create a plan

Once you have your credit report, the next step is to make a complete list of all your debts, including the total amount owed, interest rates, and minimum monthly payments. You can find this information on your loan documents or statements; otherwise, you can contact each of your credit providers for this information. Take some time to think about how you will repay your debts and what you can realistically afford each month. What will motivate you to stay on track? 

3. Focus on high-interest debts

Focusing on paying off high-interest debts is one of the quickest ways to become debt-free. High-interest debts, such as credit card balances and payday loans, can quickly accumulate and become unmanageable. Consider paying more than the minimum amount due each month on these types of debts. Even small extra payments can make a significant difference over time, reducing the total interest you pay and helping you pay off your debt faster.

4. Make consistent payments

Consistency is critical when managing debt. Ensure you make all your debt payments on time each month. Late or missed payments can result in additional fees, higher interest rates, and a negative impact on your credit score. Set up automatic payments or reminders to help you stay on track. 

5. Celebrate your wins

Each time you pay off a debt, no matter how small, you achieve a victory that encourages you to continue your debt repayment journey. Celebrate these small wins in an affordable way that’s meaningful to you, to keep your momentum going. 

If you’re having difficulty managing your debt, there are other steps you can take:

• If you are struggling to pay your bills on time, speak to your credit providers sooner rather than later. These businesses have teams to help you in these situations.
• Use some of the free budgeting tools available such as www.sorted.org.nz to help you manage your money better.
• Contact MoneyTalks for guidance from a financial mentor. 
• If you are a victim of financial abuse and would like help or advice, please contact GoodShepherd.