Debt Management: For A Debt-Free Life

debt management

Nowadays, most people are saddled with debts. If you are one of those people who do not have debt, congratulations and this article is not for you. But if you are like the majority, this article on debt management might give you some thoughts on how to reduce your debt.

Types of debt

There are a few ways to classify debts but I am going to use my own definition. I divide debts into two major categories.

Consumption debts

These are loans that are taken to purchase items or services meant for enjoyment or consumption. Generally, these loans come with high interest rates. Examples are car loans and credit card loans.

Investment debts

These loans are used to purchase investment assets. These assets have the potential to appreciate in value and/or provide regular income. One example is mortgages.

Personal loan

Before we continue, let me discuss a bit on personal loan. Personal loan, depending on its usage, can be classified as consumption debt or investment debt. If the purpose of taking personal loan is to fund your lifestyle, it is a consumption debt. On the other hand, if it is taken to purchase investment assets, it is an investment debt. But you should think twice before taking a personal loan for investment. The interest rate might work against you in the end.

Paying down debts

First, assess your debt situation.

Create a detailed list of debts: balances, interest rates, and minimum payments.

Second, create a debt repayment plan.

You may employ snowball or avalanche technique. The snowball method pays off the debts starting with the smallest balance first, while paying minimum payment on larger debts. In contrast, the avalanche method focuses on paying the loan with the highest interest rate first, while paying minimum payment on other loans. Mathematically, the avalanche method will save you more money but the psychological boost from the snowball method should not be overlooked. Depending on your character, choose the one that works for you.

Create a budget and allocate extra funds towards debt repayment. Whenever possible, negotiate with creditors for better terms or payment plans.

Third, avoid further debt accumulation.

Since you are on the path to clear your debts, it is important not to take on more loans. Otherwise, it will be a never-ending cycle.

Seek help if you cannot cope

If your monthly debt repayment exceeds your income, do not be afraid or ashamed to seek help. It is imperative to realise and tackle this situation sooner than later. You may go to your creditor(s) and ask for new repayment structure. Consider debt consolidation or refinancing options.

You may also visit Credit Counselling and Debt Management Agency (AKPK) to ask for help. The officers there will be able to help you with this issue.


Every loan needs to be repaid. So, if you can, avoid debt at all. But it is near to impossible for most of us. In debt management, we aim to pay down the debts as fast as feasible, reducing total interest paid. Let’s start now towards a debt-free life.

How can a financial planner help you?

I will make a list of your current debts and devise a debt management plan for you. You should decide whether the snowball method or avalanche method is to be used. As it is your finances, you are the ultimate decision maker. Even if the plan is perfect, it would not work if you do not implement it. So, let me know your preferences and select a plan that you would implement wholeheartedly.

If you really cannot follow the plan, do not worry and let me know as soon as possible. I will come up with alternatives. Nonetheless, if you always fail to adhere to the plan, perhaps the plan needs to be overhauled. I will help you with this. I will also refer you to the appropriate party to seek help if your situation warrants it.

If you are interested in working with me to improve your finances, just leave your details by clicking the button below. I will reach out to you and see if we would be a good fit for each other.

Disclaimer: This post is for informational purpose only. You should use judgment and conduct due diligence before taking any action or implementing any plan suggested or recommended in this article.


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