Buying things on debt may give you instant satisfaction, but it creates obligation to pay the amount from future earnings. So, buying a thing on debt or on equated monthly installment (EMI) may appear affordable, but making a habit of doing so may create tremendous financial stress on you in future.

In such a situation, any disturbance in future earnings may make you even bankrupt.

Even if you manage to stay afloat, too many EMIs may put severe constraint on your ability of future spending, even on essentials.

So, it’s important to restrict your desire and spend within your earning limits to ensure that you have capacity to spend during festivities to bring happiness among your near and dear ones.

“While your debts should not define who you are, they certainly have a significant impact on your finances. Especially with the holidays approaching, it’s tempting to lose track of your definitive financial obligations and hamper your credit score by overspending on materialistic items,” said Nitin Mathur, CEO, Tavaga Advisory Services.

Talking on how to manage your finances properly, Mathur said, “To manage your debt effectively, the first step would be to maintain a rigorous budget and save up for an emergency fund in order to meet your financial obligations on time. It is also critical to select an appropriate and suitable debt repayment strategy, such as the “snowball method,” in which the smallest debt can be paid first, the “avalanche method,” in which the largest or highest interest rate debt can be paid as quickly as possible, or the “debt consolidation method,” in which all debts can be consolidated into a single account for easy repayment. You should also set up monthly bill payment reminders which will not only save you time, but will also help you save a significant amount of money.”

Giving his views, Manikanta Racharla, Chief of Growth & Co-founder at Coine.ai, said, “For some, “debt” is just like a four-letter word, but for others, this word is the synonym of burden – and you can’t avoid it. But with the festivities around the corner, we don’t want to be weighed down by the burden of debts and EMI’s.”

Racharla lists some steps on how to break free strategically from this rut –

Savings are saviors: This is the first source to consider. Start by paying off the loan with the highest interest.

Debt consolidation: Be smart and consolidate all debts in a single loan – and enjoy low-interest rates on high amounts.

Reduce the tenure of your loan, and the EMI amount will decrease automatically.

Extra payments: Ditch the usual EMI concept and take advantage of pre-payments. Why? Because with the decrease in the principal amount, the interest amount also decreases.

Talking on how to manage debt, Anil Pinapala, CEO & Founder of Vivifi India Finance, said, “Personal finance is an important aspect of our lives and how we plan it impacts all other factors related to it.”

“Timely repayment is the key to having a healthy credit score, and this again is crucial to any future loan need/s you may have, as well as for keeping interest rates low,” he added.

“One should avoid delayed payments or missed payments as they lead to additional financial burden because the bank or the lending institution will then charge late fee, penal interest, etc which again will increase payment burdens. To avoid such hassle, borrowers can consider prepaying loans in part or full when they have access to extra cash, but before one opts for this, it is important to make sure that there are no prepayment penalties or one can negotiate for waiver / lowered penalties for prepayment,” Pinapala suggests.