Debts are all those bills that you have to pay in installments within a specific timeframe, such as credit card purchases or financing. Defaulting on these debts, that is, not paying them within these specific timeframes, generates interest on these debts, creating a snowball of amounts that grow and become increasingly difficult to pay. The problem is that, for many people, bills pile up because their salary simply does not cover all their expenses .

For example, imagine someone who earns a minimum wage and has fixed bills such as rent, food and transport. If there is an unexpected extra expense, such as a health problem or home repairs, the solution is often to resort to a loan. The problem is that, without good financial planning, the installments run high, the interest accumulates and the debt grows quickly.

To pay off debts , it is not enough to simply create an efficient financial plan. It is essential to be clear about the total amount owed, including interest and deadlines. In addition, it is necessary to consider other financial obligations so that paying off debts does not compromise the basics. The first step is to understand that efficient planning must follow principles such as:

• Know exactly the size of the debt – including interest;
• Set realistic monthly payment goals;
• Avoid taking on new debts while there are still outstanding debts.

Strategies to pay off debts

Not all debts are equally important. Some, such as credit card debts, charge very high interest rates and should be prioritized. With organization, it is possible to get out of this situation. Check out some practical strategies:

1. List all your debts and prioritize them

The best course of action is to retire one debt at a time. Yet if you have multiple installments underway, list all your debts with amounts, interest, and payment schedules. This way, you know what needs to be addressed first.

2. Negotiate the amounts and try to reduce interest

Many creditors offer good conditions for debt renegotiation, such as discounts for those who pay in cash or installments with better conditions.

3. Cut unnecessary expenses in your daily life

You know that streaming service you never access or that everyday product that could be replaced with a more affordable one? Small actions like these can have a big impact at the end of the month.

4. Track your finances and set a budget

Use intuitive financial apps that provide tools to save money and make it grow. Many apps are available that allows you to view your transactions, organize your finances , schedule payments so you don’t miss deadlines, and even create financial reserves for emergencies, which can yield up to 100% of the CDI. This is a very important strategy to help you make a dream come true or even to avoid having to change your daily budget in case of an emergency.

5. Look for extra income , even if it’s small

From making cakes in jars to walking pets, there are several entrepreneurial options that can be incorporated into your routine in a calm and safe way — choose something that you enjoy doing and that doesn’t overwhelm you.

6. Avoid new debts to avoid compromising progress

Paying off debt without changing your financial habits can lead you to the same problem again. Control your credit usage and only spend what fits within your budget to avoid financial hardships in the future.

Tips to avoid falling into the debt cycle

Once you have organized your finances and paid off your debts, the challenge is to maintain this stability. An important part of your financial planning should be to ensure that you stay organized for the long term. To do this, some good practices can help:

• Use credit wisely and avoid impulsive purchases: before paying for something in installments, ask yourself if you really need the item and if you can pay the installments without compromising other bills.
• Reassess your budget to adjust as needed: Expenses and income can change over time, so your financial plan will need to be adjusted as well. So review your accounts periodically.
• Have clear and realistic financial goals: Setting goals, such as saving money for a trip or buying a good outright, helps you stay focused on your financial planning and avoids creating new debts.
• Cut out the “I want” items and focus on the “I need” items for a while: prioritize the essentials until you have a more comfortable financial situation. Once you’re stable, stick to your budget to include the “I want” items consciously.
• Limit the number of credit cards you have: the more cards you have, the greater the risk of losing control of your spending. Ideally, you should only have one with a limit that is consistent with your needs.
• Don’t spend on your credit card if you can’t pay it back: use it as a facilitator, not as a form of financing.