Debt Management Strategies
Proven methods for managing debt, negotiating with creditors, and creating sustainable payment plans that improve your credit score.
The Debt Avalanche Method
Pay minimum amounts on all debts, then put extra money toward the debt with the highest interest rate.
The Debt Snowball Method
Pay minimum amounts on all debts, then put extra money toward the debt with the smallest balance for psychological wins.
Benefits:
- • Quick psychological victories
- • Builds momentum and motivation
- • Simplifies your debt portfolio faster
- • Easier to stick with long-term
Negotiating with Creditors
- • Review your account history
- • Calculate what you can realistically pay
- • Prepare your hardship explanation
- • Have account numbers ready
- • Choose a quiet time to call
- • Be honest about your situation
- • Ask for a supervisor if needed
- • Get everything in writing
- • Don't agree to more than you can pay
- • Record the representative's name
Important Reminder
Never give creditors access to your bank account for automatic withdrawals unless you're absolutely certain about the arrangement. Always get payment agreements in writing before making any payments.
Creating a Sustainable Payment Plan
1. Calculate Your Debt-to-Income Ratio
Add up all your monthly debt payments and divide by your gross monthly income. Aim for:
Excellent
Manageable
Concerning
2. Prioritize Your Debts
Secured Debts
Mortgage, car loans, secured credit cards
Tax Debts
IRS, state taxes, property taxes
High-Interest Unsecured Debt
Credit cards, personal loans
Low-Interest Debts
Student loans, low-APR personal loans