Although most of us don’t love the thought of owing money to anyone, debt can sometimes be helpful. In cases such as education loans which can help you earn a college degree, which will hence let you build your wealth, debts can be seen as an investment. Similarly, mortgages can be considered good debt because they let you build equity in your home.

But when you fail to plan the right use and payments of the loan amount, you could become “upside down,” meaning you owe more than you borrowed or used. Essentially, debt becomes “bad” when you’re unable to pay the money you owe. This is when debt collectors or banks will start reaching out to you with reminders and you may even face legal problems if you cannot pay the money back. It can be overwhelming as well as confusing.

All it takes is a little planning to tackle the most important piece of effective debt management: determining whether a particular debt will reward you with more than what you’ve invested. Here are some tips:

1. Create a Budget

The first step to managing debt is to figure out a budget. This will help you track your income and expenses and identify areas where you can cut back. Once you have a budget, stick to it as closely as possible.

2. Make a Debt Payoff Plan

Once you have planned out the budget, the next step is to create a debt payoff plan. This plan will outline how much you can pay each month toward your debts. There are several different methods for paying off debt, such as the debt snowball method or the debt avalanche method. Whichever method you choose, stick to your plan and make your payments on time.

3. Get Help from a Credit Counselor

Sometimes, you may not get enough time or energy to put effort into planning a pay-off plan or managing the budget. At that moment you may want to consider getting help from a credit counselor. A credit counsellor not only helps you plan out a budget but will play an important role in negotiating with creditors and even creating a management plan.

4. Consider Debt Consolidation

Debt consolidation is another method that can help you combat debt. Debt consolidation is a way to combine multiple debts into a single loan with a lower interest rate. This method helps you manage your debt easily so that you pay it off quickly. However, it is important to compare the terms of different consolidation loans before choosing one.

5. Avoid Adding More Debt

Once you have started to pay off your debt, it is important to avoid adding more debt. This means using credit cards responsibly and only borrowing money when necessary.

6. Be Patient

Paying off debt requires time and effort. Don’t be discouraged if you don’t see results immediately. Just keep following your plan and making your payments on time.

Here are some additional tips for managing debt:

• Negotiate with Creditors: If you are struggling to make your payments, you may be able to negotiate with your creditors. They may be willing to lower your interest rate or extend your due date.
• Consider Debt Settlement: Debt settlement is a process in which you negotiate with your creditors to pay off your debt for less than the full amount. However, debt settlement can have a negative impact on your credit score.
• Avoid Bankruptcy: Bankruptcy should be a last resort. It can have a major negative impact on your credit score and make it difficult to get a loan in the future.

Remember, you are not alone in this. Many people struggle with debt. But by following these tips, you can take control of your finances and get out of debt for good.