One of the hardest tasks you might have at the moment is managing debt payments in the middle of the pandemic. You could be dealing with reduced income from fewer hours at work. As a result, your savings are dwindling down. These factors make it extremely difficult to manage your finances at this time. But it does not mean it is an impossible task.
This is a unique time for everyone with the health crisis still on-going. It has rippled out into personal finance matters as soon as businesses started making adjustments. As a result, you might begin to take drastic measures when it comes to money management. This involves how you handle your debt obligations.
Do you pay your debt or save money?
This is the first question you need to answer when managing debt payments. Is it better to use your money to pay off debt accounts or save them for future use? This is a question you need to carefully weigh and analyze. Of course, there will never be a straight and simple answer to this question. What works for some people will not always work for everyone.
You need to look at your budget, the savings you have if any, and even your goals at present. If you feel that you are secure with the work you have at the moment, it is a good indication that you can prioritize debt payments for now. But if you are running low on funds with no income source in sight, minimum payments could do in the meantime.
Do you have all your basic needs covered?
Managing debt payments at this time is tough because more often than not, you are working on a tight budget. That being said, you need to make sure that all your basic needs are covered first. This means putting food on the table, a roof over your head, clothes on your back, and even medicines you need to stay healthy.
Once all your basic needs are met, you can now focus on other areas in your finances including debt payments. At the very least, you always need to make the minimum payments on your debt accounts. It will help you stay current on your payments and prevent huge charges, penalties, and other fees from being added to your payments.
Will your lenders work with you in debt repayment?
One of the things that have come out from all these financial hardships are lenders stepping up. They are offering repayment programs to consumers to help them catch up or stay current on their accounts. Consumer Financial Protection Bureau shares that there are some lenders that lower interest rates, waives late fees, and even lowering monthly minimum payments.
This is one of the reasons why you need to reach out to your lenders and tell them about any financial hardship you are going through. They might have a program you don’t know about which can help your current situation. If not, lenders might extend some form of financial assistance to help you out. Remember that it will also benefit them that you stay current on your payments.
Tips in managing debt payments
Now that you understand some of the concerns that go into debt payments at this time, it is time to roll up your sleeves and focus on your payment accounts. Here are a few things to look at as you do that.
List all your payments down
The very first thing you need to look into is to make sure that you have a list of all your debt obligations. This seems to be an easy enough task but a lot of people overlook and skip this very important step. How can you make an informed financial decision when it comes to your debt payments when you do not even have a complete list?
One thing this helps you with is lowering the chance of overlooking payments. If you have a list, make sure you make it as comprehensive as possible. More than just the lender’s name and amount, it will also help if you include due dates, interest rates, and even the contact numbers for each lender you are paying every month.
With this list, you can set your priorities when it comes to payment. You can choose to focus on the items with the highest interest rate. It is also possible to double-down on the payments with the lowest balance. You can also use this list to help you contact your lenders to ask about repayment programs they might have. This can be a big help especially when you are trying to make ends meet with limited funds.
How much money is coming in
If you are in the process of managing debt payments, it is important as well to have a comprehensive understanding of your income. You need to make sure that you are able to account for all that goes into your monthly income. This helps you spread out and meet your payments on time. It also lets you know how much you have and what you are expecting to come in.
What can you pay with what you have
Now that you have a list of your debt obligations and how much you have, you can start prioritizing your payments across your financial obligations. You can choose where to focus extra payments while making paying minimum on the rest. It can be paying the minimum on the accounts with low interest and putting more on high-interest loans. This is a good idea especially if you want to save money in the future.
Cut down your budget to core essentials
Managing debt payments might come to a point where you have to cut down on your expenses at home. This means that you budget down to core essentials. You have to go back to your budget and look at what you can take out from your expenses. This means that if it is not a basic need, you need to think about the expense.
At this point, you need to carefully look at your wants from your needs. There are instances where your wants could be masked as needs. You then end up spending too much on one item. This puts your budget on the red. Cut down and separates what you need from what you can put off in the meantime. Focus on expenses that will put a roof over your head, food on your table, and keep the lights at home.
Stay away from unnecessary debt
As soon as you take out unnecessary spending, you need to stay away from adding payments you do not need. CNBC shares that even before the health crisis, Americans had over $20,000 in personal debt. You might think that once you free up your payments, you can start replacing them with other obligations. It might even be something that slips past you. From music streaming subscription to buying items online just because they were on sale. You need to carefully discern how you spend money now more than ever.
It is tough to be managing debt payments in the middle of a pandemic but you should not give up. There are ways to help you do this. You just need to have the resolve to get them done.