What to Do Wen you Have Debt

You will find a very famous quote saying – reducing debt means changing the habits. Yes, that’s correct, but the question is how? And this is something we will talk today.

Here in this post, I am going to talk about few actionable items which will help you understand what to do when you are in debt which will actually help you reduce debt over time greatly.

#1 Setup automatic saving account

This is nothing but start saving money. If you never had the habit of saving money, then this is the time. If you don’t know how to manage the expenses those can be in future like birthday presents, some celebrations, kid’s school trip and so on then start saving now. The best way to do this is by setting up an automatic saving account. You can set up such account directly through your bank so that whenever some deposits come to your account, some portion directly goes to saving account. Over a period of time, this becomes a good number.

#2 Start planning your EMI

When you’re in debt, one of the things that hit you most is missing EMIs. There can be various reasons for this like you didn’t have sufficient amount in your account on the EMI date , or it is manual process , and you forgot to deposit. No matter what was the reason, you will end up disturbing your CIBIL and credit score. The best way to manage the EMI is – at the start of the month, pen down what is the total EMI that’s going to be deducted and then plan from where it will come. Once that is sorted, think about other expenses.

#3. Create an emergency fund

Usually debt comes when you don’t have money for some unexpected expense , and you end up taking a loan or using your credit card. All this happens because you were not having an emergency fund. A good way to estimate how much emergency fund you need is estimating the monthly expenses. Let’s say your monthly expense is $2k, then you need at least $12k as an emergency fund. Now when you know how much you need, start building that money. The good thing is, you don’t have to do this in a month or quarter , but over a period of time. So, that next time when something unexpected comes in, you don’t have to take a loan or overburden your credit card.

#4. Pay off debt with higher interest rate first

If you have multiple debt account then first pay off debt which has higher interest rate. For example, let’s say you have a home loan, education loan, and some loan from credit card which you were not able to pay. Now, home and education loans’ interest rate is usually lower compared to the interest you pay on credit card. So, you should prioritize paying for credit card first and then take from home and education loan. You may also think of debt consolidation which will give you just one account , and you will have a single EMI for all your debt account. For more details on debt consolidation, click here.


This was a quick guide on what to do when you have debt. Saving and spending is a habit and should be done very carefully. You should never spend today thinking about you will get money tomorrow. Do let me know what you think on this.