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Self Help Debt Management – Step-by-Step Guide

self-help debt management

Debt collectors generally have a bad name nowadays. Some of the tactics that they employ can be a bit nasty and forceful, and some of the language they use is also a little strong too. 

A few years back, this actually led to a change in legislation around debts and debt collectors – while the rules are stricter, they can still be pretty persistent. 

Knowing what you can manage debt-wise is really important, and the best way of figuring out a payment schedule is by working out a self-help debt management template to follow. If a debt management plan is well thought out and run correctly, it should help you pay off your debts in an affordable way.

We’ll dive into a step-by-step guide into self-help debt management and give you some handy templates to use.

What is a self-help debt management plan?

While there are lots of organizations out there that can help you out with debt and financial advice, you may want to take things into your own hands and work out your own self-help debt management plan

A debt management plan is a plan that can help you get out of debt by making payments that you can afford. While you can enter into one of these plans with the debt collection agency or creditor you owe, you can also set up your own self-help debt management plan.


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Setting up a self-help debt management plan

First things first, you’ll have to take a deep dive into your spending habits, your budget, and what you owe overall. Once you’ve gathered this information, you should set up a detailed and concise spreadsheet. 

This spreadsheet will be an essential part of your self-help debt management plan. This will help you keep track of payments and balances, and will mean you can calculate your repayments with ease, as well as taking into account any interest you might garner as well.

Debts that you owe

Organize your debts on this spreadsheet too. Make sure you include details about how much you owe, the interest rate, how much you are expected to pay each month, and the due date for each payment. This will let you figure out the overall amount you owe if you have more than one debt, and will be really useful in figuring out your self-help debt management plan.

Income & expenses

You should also organize all your monthly expenses that take priority and need to be covered first into the spreadsheet – things like rent, utilities, food, student loan payment or any other necessary bills you might have to cover. Also organize all your sources of income for each month. Then subtract the monthly expenses from your monthly income. The remaining amount is the amount you can feasibly put towards paying your debts.

Paying off your debts

There are two different methods you can employ for paying off your debts, and your self-help debt management plan will be really useful for working out each one. It’s important to keep track of what you’re paying each month, and noting how quickly the debt is being reduced in your self-help debt management plan.

Debt Snowball

The first way of paying off your debt is known as a ‘debt snowball’. This is when you start by paying off the lowest debt first, and work your way up to the highest, not taking the interest into account. 

Using this method, you’ll see on your self-help debt management plan some immediate success, which builds momentum and boosts your confidence. This method does allow interest to rack up on the larger debts, however, as you are slowly working your way up to them.

Debt Stacking

The second method is known as ‘debt stacking’. This is when you pay off your debts starting off with the ones that have the lowest interest rate, and working your way up to the ones that have the highest interest rate. 

This method feels much slower than the debt snowball method, but in the long run, it will actually help you save more money. 

Expenses

Once you have your self-help debt management plan all laid out in a spreadsheet, you will be able to work out your budgeting and expenses much easier. You can also see where you might be able to save more if you have any other expenses, such as gym memberships. 

If you can work out where you might be able to make cuts, then you will be able to save larger amounts of money each month. You also might be able to negotiate lower rates with recurring expenses such as monthly subscriptions or utility bills.

Credit Cards

Another method you can use to limit your expenses while you are in ‘debt mode’ is to close or to freeze your credit cards. In a traditional debt management plan that you would set up with an independent company, you would be required to stop using your credit cards entirely.

You should also not even consider applying for any new cards or do anything that might get you into more debt until you’ve sorted out your current debts found in your self-help debt management plan. 

Contact your creditors

The best thing to do really, is to contact your creditors and discuss your options with them. They may be sympathetic and they may agree to freeze interest rates or accept lower monthly payments if that suits you. 

If you are able to prove that you are making motions to rectifying your position using your self-help debt management plan, they will be more open to working with you. They might change the payment dates, for instance. 

Final thoughts

It can be an emotional rollercoaster dealing with debt. It is reassuring to know that when it comes to carrying debt, you’re definitely not alone. There are millions of adults in the UK who all suffer from it, and will be going through the same things as you are.

By creating a self-help debt management plan, you can work out the best course of action in repaying your creditors, and also you can see if you need further help or should consider debt consolidation as an option.

If you are looking for excellent professional advice that is also free and confidential, you can get in touch with any one of these services and charities, and they will help you on your financial journey.

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  • Affordable repayments with an end date in sight
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring
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