Definitive Guide to a Debt Free Life – Chapter 6: Debt Management

The foundation for a debt free life is debt management. Setting up a debt and money management plan when you are struggling with debt is an essential step in the relief process.

And that is why we are going to focus on debt management in Chapter 6 of this guidebook.

Keep in mind that the debt management we are talking about is different from another type of debt management you might have heard about before.

We are talking about debt management from a personal standpoint, as a do-it-yourself (DIY) procedure. We are going to focus on how you can manage your debts and your money without the aid of a relief organization.

The other type of debt management is a service offered by many debt relief companies and credit counseling agencies. It is a paid relief strategy where your debts are negotiated and reduced and a new payment plan is laid out. While these programs are undoubtedly useful, attempting debt management on your own is the best first step for most people.

debt free life

We will start Chapter 6 off by talking about what exactly a debt and money management plan is. (

Debt & Money Management Plan

A debt and money management plan is essentially the very best way to get out of debt and maintain a debt free life. It is a strategy that should be incorporated by everyone, despite your personal situation, problems, and goals.

Basically, a debt and money management plan is a method of making sure your money goes where it needs to go. It is one of the best ways of ensuring your debts are being paid off on time and in full. It can help you put your priorities in perspective.

A debt management plan breaks down your expenses by category so you know how much you need to spend on each category every month. This gives you a strong idea of where your money is being spent and how it can be better spent.

Knowing where your money is going and how much you make versus how much your expenses cost is essential in figuring out how much you can afford to pay towards your debts each month.

And knowing how much you can put towards your debts each month is the key to getting out of debt quickly and efficiently. ( 


The first step to a debt management plan is a solid budget plan. And the first step to budgeting is asking yourself why you are in debt in the first place.

Were all of your purchases necessary? Do you know how to use a credit card correctly? Are you living above your means? Are you making a big enough income each month?

Finding out why you are in debt will help you stop yourself from piling up any more charges while you are working to get out of it. It will also prevent you from falling into debt again once you have paid off that which you currently owe.

After asking yourself these questions, you need to make a list of your monthly expenses and how much they cost you. Divide these into two main categories: necessities and extras.

Necessities are things like rent, utilities, gasoline, food, and, of course, your debt payments – things you cannot live without. Extras, on the other hand, are things like television, new clothes, and nights out at the bars.

When you are in debt, you need to limit your extra spendings as much as possible. Though you should not completely eliminate the fun things in life, you do need to cut down on them if you hope to put more money towards your debt payments.

It is also a wise idea to try and pare down your necessities wherever possible. Can you save money on gas by taking the bus or bicycling to work a few times per week? Can you save money on utilities by keeping the lights off or the heat at a slightly lower temperature?

Budgeting is all about making sure you spend less than you make each month. A spreadsheet or are excellent ways to keep your expenses within your income. Ideally, you will use any money that is leftover to make larger debt repayments and get out of debt as quickly as you can. 

Saving Money 

Not very many people are fully aware of the importance of saving money while in debt.

Most people that are struggling with debt feel it is necessary to put all of their extra money towards their debt payments. While getting out of debt as quickly as possible is a valid goal, you should also attempt to save money during the process. 

The prime reason for this is that your savings can act as an emergency backup if a crisis arises. Chances are your debt problem would not be quite so bad if you had a good chunk of money saved up beforehand. If an emergency comes up, like a car repair or a medical expense, then you will have the money to cover them and protect yourself financially.

One of the worst things possible is to pay off your debts only to fall into more because you do not have backup money on hand.

Even dedicating $50 to $100 per month towards your savings is a great start. The point is not only to build your savings account. It is also to create strong money management habits. And being able to save money is one of the most important good habits to have.

Debt Repayment

Finally, we get to the debt repayment side of debt management. As its name implies, this is simply the part of the process where you pay back your debts.

As has been mentioned several times throughout the course of this chapter, you need to figure out how much money you must put towards your debts each month. This is the minimum amount that you need to pay back each month not to suffer from late penalties or increased interest.

Use this amount as a baseline and work towards it. Ensure that your budget plan leaves you enough room to cover these minimum payments. Then work from there to open up more of your budget to allow for increased payments.

The faster that you pay off your debts, the better. Interest, after all, can add up to a walloping total by the time a debt is actually paid off.

And, as always, if you are having trouble sticking to a DIY debt management plan, there is no shame in contacting a credit counselor or financial advisor for help and advice. And there is certainly no shame in turning to a debt relief company for the aid that you need to succeed.

Getting out of debt is all about solid debt management. Setting up a budget plan, saving money, and making minimum payments on time are important whether or not you are tackling your debt problem on your own.

In the next chapter of The Definitive Guide to a Debt Free Life, we will talk about credit monitoring. Credit monitoring is an extremely useful way of keeping track of your credit health. (


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