One of my favourite children’s stories is “There’s No Such Thing as a Dragon”. In the story, Billy wakes up one morning to find a small, kitten sized dragon in his bedroom. Unfortunately his mother tells him there is no such thing as a dragon so Billy ignores his new find. This just causes the dragon to grow bigger, and bigger, and bigger until finally everyone acknowledges the dragon and soon he begins to shrink back to a more manageable size.
Debts are a lot like that. Ignoring the problem won’t make your debts go away. Instead they get bigger and bigger and bigger, just like Billy’s dragon. Debts grow because of interest. Stress grows from the challenge of making monthly payments. Creditors start calling because of missed payments. The problem grows.
Instead, take action. The first step to managing your debt is recognizing the problem. Only by understanding your debt situation, can you begin to build a solution.
Get Familiar With Your Debt
Billy had to get to know his dragon. You need to get to know yours. Here are some tips and tools to get started:
- Make a list of all of your debts and outstanding payments. Total them up.
- Find out how bad your situation really is. Use our Debt To Income Ratio Calculator to find see how serious your debt problem is and what solutions you might have.
- Ask yourself if you can afford to repay them on your own or if you need professional debt management help.
- Try our Debt Repayment Calculator to find out what your monthly payment will need to be to reduce your debt on your own.
- If your debts are too high to manage yourself, try our Debt Options Calculator to compare what you will pay under different debt relief solutions.
Take Action – First Debt Management Steps
Now that you know what you are dealing with, you can begin to repay your debt more aggressively. Here are some easy first steps towards better debt management:
- Find ways to reduce your spending and increase the amount of cash available to apply towards debt each month.
- Make a payment towards your debts each and every payday. Don’t wait to the end of the month so that you are tempted to spend your paycheque on something else. An added bonus is that early payments will reduce the amount of interest you are charged. This is much better than having money stay in your bank account for an extra week or two until the due date on your credit card bill.
- Spend ONLY what’s left over. Do not incur any new additional credit until all of your debt repayment goals are achieved. If you have trouble controlling your use of credit, leave your credit cards at home until your debt is paid off.
This is just a start, but it’s a simple start. Sometimes that’s all it takes. Acknowledging you have a debt problem, making a list, and making better payments. Once started you will, like Billy, find your problems getting smaller and smaller faster than you think.