As with any seemingly insurmountable task, the best approach to debt reduction is to chip away at it in an organized fashion. In other words, you’re going to need to work a strategy if you’re going to win at this game. Here is a collection of things you can do today to reduce your debt. Applying them consistently and in an organized fashion will soon find you living a debt-free life.
1. Stop Creating Debt
Yes, it feels good to shop for something new; it feels good to get it too. However, once you’ve made the purchase, that feeling goes away and pretty soon you’re craving it again. Understanding how this works goes a long way toward helping you stop it.
New rule, if you can’t get it with cash and it isn’t a genuine need, let it wait until you can get it with cash. Pause at least 48 hours when you’re tempted to make a purchase, give the craving time to pass.
Unsubscribe from retailer’s newsletter and catalog mailings, cancel subscriptions. Stop carrying credit cards everywhere you go. Go to all the retail websites you frequent and take your credit card numbers off of them. These steps will reduce temptation and make purchasing things less convenient—which will give you time to think.
2. Evaluate Your Spending
Keep track of every cent you spend over the course of a month. This will help you see where your money is going and could reveal some costly habits. Tally of all of your discretionary spending, as well as your bill payments.
Many of us are paying for subscriptions we no longer use or enjoy. You might be paying five dollars a day for a cup of coffee on the way to work every day. Look for expenditures you’re making on things you can live without. Repurpose that money to killing your debt instead, following the strategy below.
3. Revise Your Payment Strategy
Whenever possible, pay credit card bills in full. If this isn’t possible, gather all of the bills on which you pay interest and list them in order from the highest balance to the lowest. If you’re like most people, you’ve probably been paying as much as you can afford on each one.
Rather than continuing that approach, make minimum payments on all of them except the one with the lowest balance. Apply the rest of the money to the lowest balance. Keep doing this every month until it is paid off. Repeat the process on the next lowest balance, continuing in that fashion until all of the accounts are paid off. Working this way will create a snowball effect, which will pay them in full sooner.
4. Renegotiate Your Loan Agreements
Creditors will sometimes lower interest rates, when asked to do so. However, they won’t do it if you don’t ask. The debt help professionals at Freedom Debt Relief can provide advice, as well as assistance in this regard.
5. Consider a Debt Consolidation
While it might sound counter-productive to take on more debt to get out of debt sooner, this approach can be successful. A consolidation loan with a lower interest rate will save you money in the long run. It will also allow you to focus all of the payments you’ve been making on multiple debts onto one.
A personal loan at a lower interest rate, with a fixed repayment term could eliminate your debt sooner and at a lower cost. Do the math and see if it will work out for you.
Other forms of debt consolidation to consider are home equity loans and balance transfer credit cards. The keys to being successful with this approach are to make sure you can pay off the debt as agreed and avoid making new charges until the consolidation is paid off.
6. Look For Ways to Increase Your Income
Maybe there are things in your garage others will pay to own. Perhaps you have a hobby you enjoy that can result in something you can sell. Maybe take a part-time job, the proceeds of which you can put specifically toward the eradication of your debt.
Once you start thinking in these terms you’re bound to have ideas.
These are but a few of the things you can do today to reduce your debt. The main thing is to act consistently. The best way to erode any monolith is with steady action.