How to Create a Debt Repayment Schedule and Stick to It
Key Highlights :
It's getting increasingly harder to stretch your salary to the end of the month, and relooking at your debt repayments could help. With the rising cost of living, fuel hikes and soaring interest rates, it is important to develop a routine that involves healthy financial habits. This includes creating a debt repayment schedule and sticking to it.
Managing credit obligations is one of the most important budgeting practices and involves putting together a debt repayment schedule that will allow you to keep your credit spend and repayments in check, even in times of financial difficulty. This includes listing all your outstanding and upcoming debts, including money owed to family and friends, as well as more formalised forms of debt such as student loans, mortgages, personal loans and store credit. It is also important to note the amount of money owing as well as the current interest rate being charged on that credit by each respective credit provider.
The best financial practice is to pay with saved cash, but this is not always practical and using credit can be a convenient way to afford larger purchases and smooth cash flows. However, it is important to ensure good credit health by taking practical steps to avoid falling into the vicious cycle of over-indebtedness.
When creating a debt repayment schedule, it is recommended to start with the smallest debts first. This will help you feel more in control of your financial wellbeing and give you a sense of accomplishment as you work your way to paying off your larger outstanding amounts. An alternative approach would be to make consistent payments against the credit facilities that have the highest interest rates. This will help you avoid accumulating unnecessary large amounts of interest over time.
It is also important to review how you spend your income before formulating a repayment schedule. This can be done by finding ways to earn extra income or see where you can reduce your monthly expenses. It is recommended to allocate any extra income in the form of tax rebates and bonuses to pay off your debt, rather than spending it on nice-to-haves.
Taking these proactive steps can have an overwhelmingly positive impact on your self-esteem and peace of mind. With a debt repayment schedule in place, you can manage your debt more effectively and ensure good credit health.
