Ways to Manage Your Debt — Big or Small

No matter how much debt you have, managing it is necessary. With small debts, it’s mostly about making regular payments and preventing them from growing. With larger debts, you’ll need a more active plan — prioritizing what to pay down first while keeping up minimum payments on everything else.

Know Exactly What You Owe

Start by listing out all your debts: who you owe, how much you owe, your monthly payments, the interest rates, and the due dates. You can double-check your list using your credit report. Seeing everything in one place helps you understand the full situation. If it feels overwhelming, debt-tracking apps can help.

Once you know your total debt and your monthly income, you can calculate your Debt-to-Income ratio (DTI). Divide your total monthly debt payments by your monthly income and multiply by 100. For example, if you pay $1,200 a month toward debt and earn $3,000 a month, your DTI is 40%. A lower DTI is better, and tracking it helps you stay aware of your financial health.

Don't create your list and forget it. Check and update it every few months as your balances change.

Pay Your Bills On Time

Paying late makes debt harder to manage because late fees add up and your interest rate may increase if you miss multiple payments. Use reminders on your phone or calendar to stay on schedule. If you do forget, make the payment as soon as possible — don’t wait for the next due date.

Creating a simple budget can help. Make sure you cover your essential expenses first (housing, utilities, etc.), and then use whatever is left to pay down your debt faster.

Create a Monthly Bill Calendar

Use a calendar to plan which bills you will pay with each paycheck. Write down the due dates and payment amounts for all your bills, and then add the dates when you get paid. If you’re paid on the same schedule every month (for example, on the 1st and 15th), you can reuse the same calendar. But if your pay dates change each month, you’ll need to make a new calendar monthly.

Always Pay at Least the Minimum

If you can’t pay more than the minimum, that’s okay—just make sure you pay at least that. The minimum payment won’t reduce your debt quickly, but it will keep your account in good standing and prevent late fees or defaults. Missing payments makes your debt grow and becomes harder to catch up on.

Tip: While you’re paying down debt, avoid using credit cards. Use cash and stick to your budget so you don’t add to your balance.

Choose Which Debts to Pay First

Focus on the debts that cost you the most. Credit cards usually have higher interest rates, so they’re often a good place to start. You can either:

1. Pay off the debt with the highest interest rate first (saves the most money), or
2. Pay off the smallest balance first (gives a quick win and motivation to continue).
3. Use your debt list to decide your order and stick to it.

Handle Collections and Charge-Offs Carefully

If money is tight, make sure you keep your current accounts in good standing first. Don’t fall behind on bills that are still active just to pay collections. Pay off old, past-due accounts only when you can afford to.

Build an Emergency Fund

An emergency fund prevents you from falling back into debt when unexpected expenses happen. Start with a small goal—about $1,000. Once you reach that, work toward $2,000, and eventually aim for 3–6 months of living expenses. Even a small cushion helps.

Don’t Mix Up Wants and Needs

It’s easy to tell yourself that you need something when it’s really just a want. Actual needs are things you must have to live — like food, a place to live, basic clothes, and transportation.

Wants are the upgrades — nicer clothes, a bigger home, a vacation, or the newest TV.

Understanding the difference helps you avoid unnecessary spending while you’re paying off debt.

Know When to Ask for Help

If you’re struggling to pay your bills and keep up with your debt, it may be time to get help. A credit counseling agency can help you create a realistic plan.

There are also other debt relief options, such as:

1. Debt consolidation — combining multiple debts into one payment, often with a lower interest rate.
2. Debt settlement — negotiating to pay less than what you owe.
3. Bankruptcy — a legal process to eliminate or reorganize debt.

Each option has pros and cons, so make sure you understand how they work before choosing one.

Quick FAQ

What is debt consolidation?

It means combining your debts into one payment, ideally with a lower interest rate. This can be done through a personal loan or a 0% balance-transfer credit card.

What is debt settlement?

Debt settlement involves negotiating with your creditor to pay less than the full amount owed. However, missed payments leading up to settlement can harm your credit score. You can do this yourself or use a settlement company — but they charge fees.

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