We all have debt. Whether we’re currently paying off student loans, a car loan, a mortgage, or even business loans, it’s safe to say that debt management is a priority in all of our lives. And when it comes to debt management, it’s always better to be proactive with your repayments rather than maintaining a passive approach – especially if you’re tackling a debt that’s accumulating interest fast.

So how exactly should you go about tackling your own personal debt? We’ll be answering this commerce conundrum today by sharing the five golden rules of debt management. Read on to learn how you can tame your own growing debt and regain control over your financial health.

1. Review your financial assets

The first thing you’ll want to do is gather all your financial assets and assess whether they’re working for you. This means looking into the interest rate and terms of your savings account to determine whether it aligns with your current financial goals. And if you are using a credit account, you may also take this opportunity to compare other credit cards that may be available to you. Who knows? You may be able to find a credit card that offers a greater interest free period or boasts a rewards program that has rewards you’ll be more likely to use.

This preliminary step should also involve looking over your superannuation – another financial asset that’s commonly forgotten or overlooked. If you’re concerned that your super isn’t growing at the rate you’d like it to, then it may be time to look into alternative superannuation funds. And if you do have multiple superfunds, consider consolidating your super so that you can accrue greater interest on your lump sum rather than enjoying extra dollars and cents on a selection of smaller sums.

2. Outline your debts and other liabilities

Once you’ve gathered up all your financial assets and have a clear understanding of your income, it’s time to look at the opposite side of the equation and weigh up all your outgoings (i.e. debts, liabilities, and regular expenses). After all, the best way to pay off your debts promptly is to make sure that you understand your debts.

You should start by first identifying all your fixed expenses. These are things like your rent, utility bills, credit card repayments, debt repayments (i.e. home loans, car loans, PAYG instalments, etc.), your home internet, travel expenses, and other expenses that you need to make to sustain your basic needs.

Once these have been outlined, you should have a reliable estimate of exactly how much you can expect yourself to spend every month on these basic life maintenance expenses. From here, you can surmise that any additional spending can be cut down in order to improve your saving power. But more on that later!

3. Develop a balanced repayment plan

Now that you have a clearer picture of your necessary expenses, it’s time to review the excess and eradicate anything that you can live without. This is the first step in developing any airtight debt repayment plan, as trimming the fiscal fat can help you then redirect your financial resources towards paying off your debts as promptly as possible.

Any subscriptions to streaming services that you’re not using? Axe them! Is your gym membership gathering dust? Cancel it now, and save yourself around $15-$30 a week, not to mention an exorbitant amount of guilt. Freeing up these funds can naturally help you meet your minimum debt repayments every month or even allow you to make larger voluntary repayments to zap your debt into oblivion.

This is also a good time to consider whether debt consolidation or refinancing is a good move for you. If you are juggling multiple debts and are finding it difficult to keep track of all your repayments, then taking out a larger loan in order to pay off all your individual debts and consolidate them into one large debt can help tidy up your finances. Just keep in mind that you should secure a debt consolidation loan that has a lower interest rate. That way, you won’t have to worry about having to deal with a single repayment that’s more expensive than all of your original individual repayments.

4. Track your expenses to avoid overspending

Once you’ve got your repayment plan in place, all that’s left to do is just maintain this spending and saving strategy until your debts are all paid off. Granted, this is a lot easier said than done for a variety of reasons. For starters, life can throw you some curveballs when you least expect it, which may result in you being saddled with unexpected expenses. Or you may just find yourself slipping into old habits here and there, and making a few impulse purchases in one month or during retail sales periods. We’re only human, after all.

Thankfully, there are ways that you can allow yourself a little leeway when it comes to your personal spending habits. It’s unrealistic to expect that you can cut down on your superfluous spending cold turkey. What you can do, however, is set yourself a budget for your personal spending every month. That way, you can still indulge in a little bit of retail therapy without overspending.

Of course, this only works if you get into the habit of tracking your spending every month. Does your mobile banking app have a feature that allows you to compare your ingoing and outgoing expenses? Then be sure to get into the habit of checking this feature periodically to make sure that your spending is within the budget you’ve set for yourself.

5. Set up an emergency fund

Now that your debts are finally starting to shrink before your eyes, now is the time to shift your focus to your saving habits. Adjust your budgeting ratios so that more of your income is going straight to your dedicated savings account every month. That way, you can start to build up your savings like never before. And with a little bit of discipline and conscientious spending, you should find yourself with a tidy nest egg in no time at all.

Consider this money to be a bit of a safety net or emergency fund for you – always there for you if you need it and ensuring that you don’t have to turn to short-term loans or other less than ideal fiscal solutions in the event that you do need to spend a little cash somewhere down the road.

With a strong savings account at your disposal, you should find managing your finances to be a lot more comfortable and a lot less suffocating.

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Financial freedom starts with cultivating strong fiscal discipline. But this doesn’t mean that you can’t enjoy the fruits of your labour and have a little fun with your hard-earned money. With all things, staying spend-savvy is all about practising moderation and maintaining good spending and saving strategies. And once you have these habits in place, you’ll set yourself up for a life of sensible debt management practices.