Skip to main content

Top Bar

  • Press
  • Search

Topbar Aux

  • Join Now
  • Locate an Agent
  • en
  • fr-ca

Action Bar

Home
  • About
    • Our Story
    • Community Impact
    • Events
    • Faces of WFG
    • Diversity at WFG
  • Finance Fundamentals
    • Financial Literacy
    • Life Insurance 101
    • How does Life Insurance Work
    • Types of Life Insurance
    • What Should You Consider Before Buying Life Insurance
    • Understanding the Basics of Financial Strategy
    • Tips for Retirement
    • Financial Strategies for Life Milestones
    • The Importance of an Emergency Fund
    • Effective Debt Management
  • Client Solutions
    • Products & Services
    • Retirement Strategies
    • Education Planning
    • Business Strategies
    • Estate Preservation
    • Client Expectations
    • Client Testimonials
  • Agent Opportunity
    • Business Model
    • Technology & Marketing
    • Training & Support
    • Agent Expectations
    • Agent Testimonials
    • Convention

Techniques for Debt Management

""

Why Is Debt Management Important?

After attending university or making a major purchase, you may need to take out a loan and go into debt. Going into debt isn’t uncommon, even for moderately well-off families. However, properly managing your debt is essential, as it can directly impact your short-term and long-term financial health. Excessive debt can limit your financial freedom and prevent you from reaching your long-term goals, such as buying a home, starting a business, or saving for retirement. Simply put, by keeping your debt levels in check, you reduce the risk of defaulting on payments and facing financial hardship. Even if you start to generate large amounts of debt, effectively managing the debt can alleviate stress, knowing that you have a plan to pay off your debts over time.

Understanding Credit Scores and Their Impact

A credit score is a number that represents your likelihood of repaying borrowed money on time. An individual’s credit score can fluctuate based on their payment history, amounts owed, length of credit history, and several other factors. Having debt doesn’t necessarily mean that your credit score will decline. Making timely payments on your debts can help improve your credit score. Regular mortgage or auto loan payments are favorable for your credit score. However, on the flip side, regularly running late on your credit card payments can lower your score and indicate higher credit risk to lenders.

Debt Management Techniques

Now that you’ve built up debt, it’s important to start managing your payments. Whether it’s a new home, car, college education, or credit card debt, these tips and tricks can help you keep your debt in check.

  • Create a Budget - One of the first steps should be creating a detailed budget that outlines your income, expenses, and outstanding debts. This process may help you better allocate your funds and strategize to pay off the debt over time.
     
  • Find Your Debt-to-Income Ratio - One metric to consider is your debt-to-income (DTI) ratio. This number compares how much of your monthly income needs to be dedicated to your outstanding debts. Creditors will often pay attention to this metric when determining loan eligibility.
     
  • Monitor Your Spending - Take note of your monthly expenses to identify areas where you can reduce your spending. Making sacrifices in non-essential categories can free up more money for debt repayment, greatly accelerating the process. While working to pay off your existing debts, try to avoid taking on new debt.
""
""
  • Prioritize Your Debts - List all your debts, including the outstanding balance, interest rate, and minimum monthly payment. While maintaining minimum monthly payments, try putting any additional funds in accounts with higher interest rates. This method is sometimes called Debt Stacking.
     
  • Paying Bills on Time - Staying organized and paying your bills on time is an essential financial habit with several benefits. It is a great way to reduce the chances of missing a payment, avoid late fees, and maintain a good credit score.
  • Consolidate Debt - Staying organized and paying your bills on time is an essential financial habit with several benefits. It is a great way to reduce the chances of missing a payment, avoid late fees, and maintain a good credit score.
     
  • Build Up an Emergency Fund - Instead of taking on additional debt when unexpected expenses arise, try to keep an emergency fund. A safety net can help you maintain your debt repayment plan without accumulating more debt.
     
  • Seek Professional Help - If you're struggling to manage your debt independently, consider seeking help from a financial professional. They can provide advice to help you develop a debt repayment strategy that works for your situation.
""

Rebuilding Your Credit

Even if you've had several months of financial challenges or missed payments, it’s still possible to rebuild your credit. Once you’ve reviewed your credit reports, make timely payments on all your bills and debts. Payment history is one of the most significant factors affecting your credit score, so consistently paying on time will gradually improve your credit score. During this time, also try to stay within your credit limit. Making purchases with a credit card and paying off your monthly balance is a great way to help rebuild your credit slowly. Paying with cash or debit card, on the other hand, will have no effect.

Developing Long-Term Financial Habits

A proper debt management plan will help you overcome your expenses. Still, staying out of debt and building up your financial stability is also essential. Budgeting and living within your means are necessary for individuals of all income levels. It is also key to continually educate yourself about finances. Reading books, attending seminars, and enlisting the help of a financial expert can help you improve your financial literacy and make smarter financial decisions. By cultivating wise behaviors, you can ensure that you stay out of financial trouble.

WFG Life Insurance: We're Here to Help

We Are Here to Help

Contact a WFG licensed agent near you.

Get Started
Home

Footer menu

  • About
  • Solutions
  • Opportunity
  • Press
  • Contact

U.S. Home Office 
6400 C Street SW 
Cedar Rapids, IA 52499

Canada Home Office 
5000 Yonge Street, Suite 800 
Toronto, ON M2N 7E9

Footer Locate an Agent

  • Locate an Agent
  • Join Now

Footer Social

  • Facebook
  • Instagram
  • LinkedIn
  • X
  • YouTube

Footer Legal

  • Online Privacy Statement
  • Terms of Use
  • Complaint Handling (US)
  • Complaint Handling (CN)
  • Do Not Sell my PI
  • AODA Policy (CN)
  • Disclaimer & Privacy Policy – Quebec
  • Complaint Examination and Dispute Resolution Policy - Quebec
  • Earnings Disclosure

©2018-2025 Transamerica Corporation

Disclosure:
In the United States, World Financial Group Insurance Agency, LLC (In California, doing business as World Financial Insurance Agency, LLC), World Financial Group Insurance Agency of Hawaii, Inc., World Financial Group Insurance Agency of Massachusetts, Inc., and /or WFG Insurance Agency of Puerto Rico, Inc. (collectively WFGIA), offer insurance products.   

California License #0679300   

WFG U.S. Headquarters: 6400 C Street SW, Cedar Rapids, IA 52499.  
Phone: 770-453-9300   

In Canada, World Financial Group Insurance Agency of Canada Inc. (WFGIAC), which offers life insurance and segregated funds  

WFG Securities Inc. (WFGS), which offers mutual funds.   

WFGIAC and WFGS are affiliated companies.   

Headquarters: 5000 Yonge Street, Suite 800, Toronto, ON M2N 7E9.   
Phone: 416-225-2121   
‍  
3851603 12.24