back to articles | September 20, 2021 | Daniel Martin

Categories: Tips & Insights For Car Buying Auto Loans & Financing

Debt Management and Financial Wellness: What You Need to Know

Do you find that you struggle with managing the money you have? It doesn't take you a long time to go through your paycheck. There never seems to be anything left behind after you pay your bills.


Do you find that you struggle with managing the money you have? It doesn't take you a long time to go through your paycheck. There never seems to be anything left behind after you pay your bills.

And, the truth is, even on the bill payment front, you are not doing very well. Some months may go by before you make payments on some debts. If this describes you in any way, take heart as you're not alone.

Industry research shows that in America, over 54% of people are living paycheck to paycheck. 21% of the population struggles to pay bills. Millennials account for 77% of those who barely manage with what they make. Over 50% of the population is not saving for retirement or reserve.

We understand that our words may not be any consolation. But, there are ways you can manage your debt and achieve financial wellness.

1. Understand Your Debt Situation

This may be the hardest part, but you need to take a good, hard look at your debt situation. Sometimes, frivolous living can land you in hot soup.

It becomes so easy to swipe your credit card anytime you see something you want to buy. Yet, you don't factor in the high interest rate you will have to pay.

Within a short time, you start falling behind in the repayments. Meanwhile, credit reporting agencies use delinquency reports to determine your credit score. There is one thing you need to know. A bad report has many implications.

Getting loans can be difficult because the lenders will do a credit check. Even if you get financing, the interest rates will be very high.

And, that is not the only negative thing about credit scores. You may miss out on a job opportunity or find it challenging to get an apartment. Debt management requires that you keep a close eye on anything that could impact your credit score.

One effective way to go about it is to avoid unnecessary borrowing. Understand that high-interest-rate loans equal bad debt. That means you should avoid any that requires you to pay rates above 7%.

Are we saying you can live debt-free? The answer may be no, depending on your means. But get smart about your borrowing. If you, for instance, need a new car, applying for an auto loan is a good option.

But, shop around and check the interest rates to see whether they will fit into your plan. Reputable companies can offer options or packages that will fit your budget.

2. Watch Out For Symptoms of Improper Debt Management

There are so many symptoms of debt you need to be aware of. They include:

  • No money going into your savings account
  • Outstanding debts take up more than 10% of your monthly income
  • You are making minimum payments, meaning the outstanding balance keeps increasing
  • There have been threats from suppliers to disconnect your Utilities
  • A huge percentage of your mail consists of notifications from creditors
  • You have to take on more than one job to just manage day-to-day living
  • Money issues are key stressors
  • Even if you have financial goals, you have no ability to realize them anytime soon.

If you are seeing yourself in any of the above, it is time to take action.

3. Get Smart with Your Money

Is it only low-income people who live from paycheck to paycheck? The answer is no. Parkinson's Law states that the more you earn, the greater your needs become, and the more you spend.

Think about an executive who gets a promotion at work. The most likely action he will take is to buy a better car. Others will move to more influential neighborhoods.

Strive to break Parkinson's Law to achieve financial wellness. Some easy to follow techniques include:

  • Set financial goals to act as a road map to where you want to be in the future. Be smart about your goals by taking into consideration what you have.
  • Create a financial budget and stick to it. Prioritize needs but also set aside something small for wants. Yes, you can splurge on yourself once in a while. Debt management and financial wellness should not feel like a prison sentence.
  • Savings should not be an option. Have an emergency fund that can sustain you for four to six months without an income. This is separate from the normal savings that you should have. Also, contribute at least 10% of your income to your retirement savings.
  • See how you can save money by cutting back on some lifestyle choices. Do you need to go to that fancy restaurant? How about cooking up a nice meal at home instead? Is it necessary to have your hair styled in a salon every single week? How about going in once a month? No, we are not saying that you should stay with dirty hair or unsightly nails during that time. There are tons of DIY tutorials online. Do you need all those subscription services? Look at it this way, subscribing to a magazine makes no sense when all the information is online. Since you're already paying for the internet, why don't you use that instead? It will surprise you how much you can save every single month.

We would recommend that you talk to financial experts. They will give you valuable insights which you can implement in your life.

Final Thoughts

There is an adage that says ‘money can't buy happiness.’ Cheeky rejoinders have included, ‘those who say money can't buy happiness don't know where to shop.’ Whether this is true or not is a personal opinion.

But, we dare say, lack of money is a sure recipe for unhappiness. It is tough to live hand to mouth, with creditors on your tail every single day. We have shared three ways that can start you on the road to financial wellness.

Take a look at your debt situation and then learn how to manage it. Avoid unnecessary borrowing and pay off high-interest loans quickly.

Understand the symptoms that are indicative of poor debt management. Have financial goals and budget your money. And most important, remember to save for the future. Smart money management will reduce stress in your life.