Developing a debt reduction plan is something that you have to do when you can no longer control your debt. If you find it difficult to get things you need, it’s natural to want to get rid of it as quickly as possible. In fact, no matter how much debt you have there is always a way out of it.
The best way to control your debt is to set some goals. Unfortunately, many debtors make the mistake of trying to set unrealistic goals and they pay their debts off too quickly. When they can’t make them they become discouraged. Some end up filing bankruptcy, because they think that there is no way around it.
Decide Your Debt Reduction Goal
Having a specific goal in mind can help you focus on the task of reducing debt. Just sit down with a pen and paper and write what you want to meet. The written goal can help you do more and do better than normal as you can refer back to it and adjust it along the way.
Alternatively, you can use this calculator and play around with the “how to be debt-free after” part to come up with an affordable payment amount.
No matter which method you use make sure the goal is realistic. Determine what you would like to get in the next week or month, which might include something as minor as being able to cope with the current budget that you set yourself for food shopping. Also, decide where you want to be in a year’s time or even five years time.
Ideas for Your Debt Reduction Plan
Steps to reducing debt include controlling level of debt, accumulating money for debt reduction and other solutions such as talking to creditors and getting help from a pro. Once you know your debt level and debt reduction goal you can start developing a budget and sorting out things that you can sacrifice and save money for reaching the goal.
Make a budget and include everything that you spend money on each month. Then find what you can realistically do without, and put the money you save on those things toward paying off your debt. Here are some things you can cut out of the budget:
- Eating out. Whether you pick up fast food for lunch when you’re working, or go out to eat with friends at a fancy restaurant once a week, you can cut costs here.
- Vices. Cigarettes, lattes and other things we buy as a matter of habit are good places to cut back. Quitting smoking is good for your health, and switching to regular coffee would be less expensive.
- Entertainment. Examine your entertainment budget and see if there are ways you could cut back. If you rent a lot of movies, consider signing up for an unlimited plan.
- Travel. With gas prices going up cutting back on travel can be a real money saver. Carpooling, and combining trips as much as possible, are two ways that can save you a substantial amount of money on travel.
Debt Reduction Plan Follow Up
It may take you several months or even a few years to get your debt paid off, depending on how much debt you’re in and how much extra money you can put toward it each month. But as long as you’re able to make your minimum payments and add a little extra to at least one of your bills each month, you will be making progress.
Once you achieve a small goal you will see that more and more of these goals, even the bigger ones, become achievable. Your achievement on the debt reduction plan will build your confidence to get out of debt and to keep your credit in good shape. Be patient with yourself, and you will be debt-free for the rest of your life.