Organising your debt

Tracking your debt is an important aspect of managing your finances, but facing what you owe can be intimidating. Ignoring your debts may save you from the stress—temporarily at least—but it's not a smart move.

Your debt list doesn’t have to include regular monthly bills such as electric service, unless you have a past-due balance.

You can verify your debt balances and the amounts by accessing your online credit card and loan account, checking billing statements or loan agreements, or reviewing court orders.

Having a list of your debts gives you a better idea of where you stand, but a list of debts can be hard to act on. By prioritizing the figures on your list, you have a roadmap to guide your debt journey. For example, if you're following the debt snowball method, you'd organize your list of debts from the lowest balance to the highest. Or you might decide to pay off bad debts first—those with high interest rates— then focus on getting rid of your less-expensive debt.

If you're savvy with spreadsheet software such as Microsoft Excel or Google Sheets, you can use it to organize your debt accounts and create custom calculations to better understand your debt picture.

Tracking your debt in the same place as your budget—for example in a budgeting app or a spreadsheet—allows you to make more informed decisions about reducing your debt. You can make adjustments to your budget and see how it may affect your ability to reduce your debt.

If you're using a spreadsheet to keep up with your debt, you can create formulas to give you additional insight into your accounts. For example, you can determine how much of your monthly income is going toward debt payments with a formula to calculate your debt-to-income ratio—your total monthly debt payments divided by your total monthly income. Or you can estimate the total interest you'll pay on a loan with the CUMIPMT calculation in a Google Sheets spreadsheet, using the interest rate, number of payments, balance, and timing of the first and last payments.

No matter which method you choose, keeping up with your monthly payments, current balance, and any interest rate changes is key to staying on track.

The Balance