Debt Management & Payoff Planning

Debt Management

Debt management is the process of organizing, controlling, and reducing your debts so they don’t overwhelm your finances. It’s about making debt affordable and manageable while avoiding extra interest or late fees.

Key elements:

1. Tracking all debts → List balances, interest rates, minimum payments, and due dates.

2. Prioritizing payments → Decide which debts to tackle first (e.g., high interest like credit cards).

3. Budgeting for debt payments → Allocate a portion of income specifically to debt reduction.

4. Negotiation/Consolidation → Sometimes debts can be refinanced, consolidated, or negotiated for lower rates.

5. Maintaining good habits → Avoiding new unnecessary debt while paying down existing ones.

Debt Payoff Planning

This is the strategy you choose to eliminate debt over time. It’s your roadmap for becoming debt-free.

Common methods:

• Snowball Method → Pay off the smallest debt first while making minimum payments on others. Builds motivation.

• Avalanche Method → Pay off the highest-interest debt first to save the most money over time.

• Debt Consolidation → Combine multiple debts into one loan with a lower interest rate.

• Hybrid Approach → Mix of snowball and avalanche depending on your situation.

Steps in payoff planning:

1. Gather all debts (credit cards, loans, medical bills, etc.

2. Choose a strategy (snowball, avalanche, etc.).

3. Decide how much extra you can pay each month (beyond the minimums).

4. Automate payments to stay consistent.

5. Track progress monthly and celebrate milestones.