Top 5 Tips on How to Manage Debt when Times are Tough

Most Filipinos are concerned about their finances, especially considering the current economic uncertainty and the impact of the pandemic. While worrying won’t help much, having a plan in place to deal with financial difficulties can help alleviate some of the burdens.

Furthermore, the financial rewards of dealing with financial issues—paying off debt, saving more, and reducing debt. These can help you improve your entire situation.

Here are some tips for dealing with personal debts.

1. Set a budget

One of the most effective ways to mitigate debt is to strive to avoid it in the first place. A budget can assist you in avoiding excessive spending. While creating a budget may seem as tedious as going on a diet, if your debt has become overwhelming, you’ll need to become more disciplined with your spending habits in order to drop the pounds.

Simply said, a budget is a breakdown of your revenue less your expenses. Your budget serves as a roadmap for your hard-earned cash will be spent each month. It will show you how much your actual earnings and expenses are, allowing you to stop worrying about your finances at night.

2. Make the most of the money you have

When times are tough, it’s easy to believe that you don’t have enough to deal with your debts. However, it’s critical to maximize the money you do have. Recognize that modest steps can build up. You might not be able to save P2,500 each month on any one expense, but you might be able to find five that you can cut by P500 each.

Divide your expenditure into two categories: needs and desires, and then seek ways to reduce your wants list. Analyze your spending habits to see where you might save money on tiny daily expenses.

Eating at home has become more of a priority, which has some advantages: you’re probably saving a lot of money by not eating out. The majority of the folks I speak with aren’t just trying to save money for monthly evenings out. They’re also saving money on work meals and coffee from the drive-through.

Many people have discovered how much money may be saved by cooking at home. When it’s all over, remember that lesson. Your grocery bill will go up, but dining at home saves you money in the long run.

3. Invest in an emergency fund

Keeping money set aside for an emergency fund, such as auto repairs, job loss, or sickness, can help to alleviate financial stress. However, putting together an emergency fund, especially one large enough to cover three to six months’ worth of costs, can be difficult. Don’t get too caught up with the amount; what matters is that you save money aside on a regular basis.

4. When it comes to debt reduction, be smart

Credit card debt is a common source of financial distress. It’s not only costly, but it can also stand in the way of your financial goals. The remedy to anxiety is a debt-paying strategy. Try to consider the pyramid strategy by paying off your debts one by one, focusing on the smallest value, or you may also concentrate on the cards with the highest interest rates. Most importantly, don’t get into any new credit card debt. Taking out another loan to pay off your debt will only make matters worse.

5. Start a side venture

Starting a passive income is a fantastic way to supplement your monthly income, and there are many possibilities available right now. Side hustles can help you relieve some of your financial stress because they are often flexible and allow you to work from home.

One of my top choices is managing social media for local businesses, but there is also a significant demand for in-person or virtual tutors and food delivery drivers. You could also work as a freelancer doing things like writing, editing, consulting, graphic design, or building websites.

Finding a side hustle can help you protect your finances if you lose your job, but it’s also a proactive strategy that can help you diversify your income, pay off debt, and put extra money in the bank. There are other resources that can help you on this aspect, click here.

Debt might be unavoidable when times are bad financially. There are, however, activities you can do ahead of time to help you improve your savings and reduce the impact on your financial health. Recognize that you are not alone and that there are options available to assist you in making the best of your situation. If you overspend, don’t be too hard on yourself; you’re doing the best you can in a very uncertain time.