How to Manage Debt Effectively with Honest

Managing debt requires a special strategy to avoid it piling up and causing unnecessary stress. Let’s explore seven effective ways to handle debt better and see how the Honest App can be your reliable partner on your journey toward financial freedom!

1. Know the details of your debt 

First and foremost, it’s essential to know the details of your debt. Record all critical information such as the total amount owed, the interest rate, and due dates. Understanding your total debt gives you a clear picture of your financial obligations, while knowing the interest rates helps you prioritize paying off high-interest debts first.

If you’re using the Honest credit card, planning your debt repayment becomes much easier. The Honest App includes a simulation feature that allows you to estimate the interest and fees you’ll be charged next month. This helps you plan payments better, avoid late fees, and keep your finances healthy. Everything is more practical and transparent with Honest!

2. Allocate a percentage of your salary to pay off debt

Once you know the details of your debt, the next step is to set a percentage of your salary to allocate for debt repayment. This is super important! Think about how much of your monthly income you can and are willing to set aside. 

For instance, you could start by allocating 20–30% of your salary. This helps you stay organized and disciplined in repaying your debt, so you know exactly how much to set aside each month without sacrificing daily needs. However, make sure the percentage you choose doesn’t leave you struggling to meet other expenses. Choose an amount that you’re comfortable with.

3. Control monthly expenses

It’s not enough to just set a percentage of your salary for debt repayment; you also need to balance it by controlling your monthly expenses. This is crucial to ensure that the funds allocated for debt repayment stay on track. Try recording all expenses, from big-ticket items to smaller ones, such as daily necessities, transportation, and entertainment.

If keeping manual expense records feels overwhelming, you can always rely on the Honest App from Honest Credit Card. This app records all your transactions in real time, making it much easier to monitor expenses. Not just major transactions—even small purchases are tracked.

With this method, you can not only manage your spending more effectively but also adjust your expenses to match the debt repayment allocation you’ve set. No more excuses or hassles in tracking expenses. With Honest, you can focus on managing and repaying your debt.

4. Pay off debt based on urgency

Once your salary allocation is set and expenses are under control, it’s time to start paying off your debt. The key is to prioritize based on urgency. Remember how you previously recorded all your debt details? Now it’s time to organize those debts by priority. Focus on debts with the earliest due dates and the highest interest rates.

For example, if you have credit card debt with a high interest rate that needs to be paid next week, that should be your top priority. Once you’ve paid off the most urgent debt, move on to the next one. Paying off debt based on urgency not only helps you avoid late fees but also speeds up the overall repayment process.

5. Consistently pay in full and on time

When you consistently pay in full and on time, you’ll feel more at ease as your debt decreases without any added interest that could strain your finances. Unlike traditional installment plans, which require you to choose between 3, 6, or 12 months, Honest offers more flexibility. You can use the Honest credit card to pay bills and decide the amount you want to pay each month based on your capability, without needing to set a fixed installment plan.

If you diligently pay in full and on time, the interest rate stays at 0%, and all admin fees are returned to you. This makes your debt repayment journey feel much lighter since you’re not burdened by additional interest. Whether it’s for shopping or emergency needs, you can also use Honest to pay various bills. Everything can be managed through one app without the need to open other applications or use different methods. The Honest App is designed to make financial management as flexible and convenient as possible.

6. Find additional income

Relying solely on a monthly salary can make debt repayment feel slow, especially if you have high-interest debts. One way to speed up repayment is by finding additional income outside of your main job. There are so many options to explore, from freelancing based on your skills, selling online, to small-scale investments that generate extra income.

It doesn’t have to be a lot, but if you’re consistent, the results can significantly help reduce your debt burden. With this additional income, you’ll have more flexibility to pay off debts without sacrificing essential needs. The result? Your debt decreases faster, and you move closer to financial freedom. So, try setting aside a few hours outside your main job because every extra penny brings you one step closer to a more stable financial state.

7. Evaluate long-term financial health

Evaluating your long-term financial health is crucial, especially after you’ve started managing your debt effectively. Take some time periodically, such as every six months, to assess your financial situation: whether expenses align with your budget, whether debts are decreasing as planned, and how your savings or investments are progressing.

This evaluation helps you determine if your current strategy is working or needs adjustment. By regularly evaluating, you can also identify obstacles early, making you better prepared for any changes in your financial situation.

Moreover, regular evaluations help you plan your next financial steps, whether it’s achieving financial freedom or meeting long-term goals like buying a house or saving for retirement. Remember, managing finances is an ongoing process that doesn’t end once your debt is paid off. By consistently evaluating your financial condition, you can ensure that all your financial goals stay on track and meet your expectations.

Ultimately, successfully managing debt and maintaining financial health comes down to your consistency and discipline. Don’t hesitate to keep refining your approach, look for new solutions, and stay optimistic!

Clean Qurrota A’yun
November 29, 2024
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