How to manage Debts in a well planned manner?

 For thousands of years, people have borrowed money to buy things.  It's how the banking business started. Debt is not necessarily bad, but if you're not reducing debt faster than you're accumulating it, then debt can be a disaster to your financial health.  Here's a question: how much is too much debt for you? Banks evaluate your creditworthiness by calculating your total debt-to-income ratio.  36% is acceptable.  Over 40% is a red flag for potential danger.  Under 30% is where you want to be.

In order to keep your debt-to-income ratio under 30%, here are some steps you may want to follow:

• Get a hold of your accounts

 First things first, make a list of your amount of debts, monthly payments, interest rate, due date and your income. Once you get a hold on your debt and income, you can calculate your debt-to-income ratio. This ratio will let you know that how much percentage of your income is going towards debt.  To find yours, divide your debt payments by your income, and multiply by 100. For example, 20000 of monthly debt divided by 60000 of monthly income is 30%. The lower this ratio is, the better it is for your financial health.

•  Reduce accumulating debt

 A small debt won't be a burden, will it? Well, that's how it starts. You make a little purchase on your credit card and then before you know it, you're in huge debt. Control the temptation of buying making unnecessary purchases because eventually, that spending will catch up with you and it will hurt your financial health then. The best way to deal with it is by creating a budget. A budget will allow you to see how much is your income and where that money is going. Making a budget will ensure that you've enough money to pay off your debts and expenses.

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• Pay your debt on time

Late payments will make it harder to pay off your debt as it will involve late fees and added interest charges. To avoid this, use the calendar on your computer or smartphone and set up reminders to remind you off the due date. Making your debt payments on time is the most important step to manage your debt. But still if you miss a payment, don't wait for the next due date. Pay the debt as soon as possible. Remember, that late payments may lower your credit score, which could prevent you from getting loans in future.

• Consolidate your debt

Multiple debts mean multiple processing fees and charges, which is why consolidating your debts into a single loan with a lower interest, longer tenure and other favorable terms and conditions could be an effective strategy of debt management and it could also save you a lot of money. Once you figure out the total loan amount you need, you should find out the best loan type based on their interest rates, tenure, etc. Some of the options are personal loan, loan against property, top-up-loan and loan against securities.

• Build a backup plan

Always expect the unexpected when it comes to your financial security. Without enough savings, you may have to resort to taking more debt if the unexpected happens. Thus, one should always have an emergency fund, as a protection against unfortunate events. An emergency fund provides you with a security shield which you can use for emergency expenses, which saves you from taking more debt.

 So, the bottom line is in order to manage your debt, you need to have an effective debt-reduction strategy in order to manage your debt.