Financial literacy tips for managing debts wisely

Debt, they say is the situation whereby a person owes another. This however does not only apply to individuals, it cuts across various levels. Debts can be between organizations, governmental ministries, and the most common one which is that of countries. Debts doesn't really have to be monetary but since we are talking about finance, we will be focusing on monetary debts while we let the other meaning of debts rest.

The common knowledge of debts is that of the negative aspects of it, however, debts also has it positive sides, such as, it is a tool used in achieving financial goals or to acquire an asset, in the form of loans.

One thing to know about this is that, loans which are not manage well, ends up as debts.

How then do we manage debts in other for it not to turn into a black hole that consumes all our finances. 

Here are the few tips we can employ in managing debts.

1. Understanding Our debts.

We need to first understand the type of debts that we have. Is it a good debt or a bad debt. We also need to keep track of all the debts we have incurred over time. Writing down the various debts can help us a lot. Doing this, helps us to have a clear picture of all available debts and help us to prioritize repayment. 

2. Creating A Budget.

Budget creation, does not only have to do with wealth creation, it also serves as a great avenue for debts management.

We need to have a well structured budget which would not only manage our debts, but also helps us save for our future.

In the creation of budget for debts, 

a. we need to identify the various types of debts( is it a high interest debt or a low interest debt), 

b. what are the due dates for this debts ( for people with multiple debts), 

c. what is our monthly income( we don't need to use all our income just for debt payment, we need to keep some too), 

d. we also need to have repayment method in our budget. Is it going to be daily repayment, weekly repayment or monthly repayment.

3. Consolidate Debt. 

We need to combine multiple debts into a single loan, especially those with a lower interest rate. This will provide a clear repayment timeline.

4. Increase Income with a Side Hustle:

 A side hustle can provide extra income, which can fasten debt repayment.

5. Use Extra Income Wisely:

We need to allocate any unexpected money, like bonuses or inheritances, toward paying high-interest debt to reduce interest costs.

6. Adjust Spending:

We have to cut unnecessary spending and align expenses with debt repayment goals. This could involve cooking at home, reducing entertainment costs, and using free resources. This means that we have to prioritize our needs over our wants.

In conclusion, managing debt wisely requires careful planning, budgeting, and a strong commitment to financial discipline. Understanding your debt types and prioritizing high-interest obligations can help prevent debt from spiraling out of control. A structured budget tailored to debt repayment ensures that each dollar has a purpose, helping to balance debt payments with essential expenses and savings. Combining debts with lower interest rates and seeking additional income through a side hustle can fasten repayment and ease the financial burden. Additionally, wise use of any extra income and adjusting spending habits to focus on necessities over luxuries support debt reduction goals. By consistently applying these strategies, individuals can turn debt from a financial hindrance into a manageable tool, building a pathway toward long-term financial stability.