Reducing debt is always good when you spend more than you save. This is especially true if you are living paycheck to paycheck with little or no savings. You might have a home and a car, but if you had no income due to sickness or job loss, you would sink fast.
Decreasing debt can also improve your health. Not worrying about how to pay for something can lower blood pressure and your level of stress. But most importantly, once you make up your mind to reduce the amount of your debts, you have taken responsibility for your personal lives.
10 Ideas for Reducing Debt Quickly
There are many ways to reduce your debts. If you are too far in debt you will need to develop a plan and stick to it. Here is a good plan to follow:
1. Stop accruing new debt. Put the credit cards away, and refrain from taking out new loans or refinancing old ones to borrow more money.
2. Set up a budget. Write down all of your expenses for a month and then make your budget. Be sure to include all the necessities, but leave out anything that you can live without.
3. Cut back on your expenses, and put the extra money toward reducing debt. Examine your budget closely and find many areas where you could save money. If you know where your money is going you can cut back to save some money. Set this money aside to pay down your debts.
4. Prioritize your debt payments. If you have secured debts other than a long-term mortgage, pay them off first. High interest debts should also take priority.
5. Pay more than the minimum payments to high priority debts. Paying more than just the minimum payment will allow you to pay off your debts faster. It also has the potential to save you money, because the quicker you pay your debt off, the less interest accrues.
6. Pay the minimum payment on all of other debts. Put all of your extra funds toward that debt, and continue to do so until it is paid off. If you get a bonus at work or unexpected money from some other source, consider putting it toward your debt as well.
7. Start putting your extra money toward the next debt after you pay off one debt. Repeat until you pay all of your debts in full.
8. Sell assets or things you don’t need. Do you have an extra vehicle, or anything else of value that you don’t use or need but are in good condition? You can sell these assets off for extra cash. Even just having a yard sale or featuring them on eBay could help you raise money to put toward your monthly payments.
9. Find ways to make extra money. You could take on a second job, do some babysitting, or sign up with a direct sales company. Though this may be tiring, if you put all of your extra money toward paying off your debts, you shouldn’t need to do this for very long.
10. Consolidate your debts. The best way to do this is to transfer all of your balances to a low-interest credit card, which will usually result in lower minimums. Avoid using home equity loans or other secured loans to consolidate if possible, because that will put your property at risk unnecessarily.
The plan will work for debt reduction if your debt level is still within your ability to pay back without getting another loan. However, if you are too deep in debt you have no choice but to borrow. If so and you are a homeowner, consider getting a home equity loan to consolidate — just be careful because that will put your property at risk.
Reducing debt fast is often easier than you think. By taking a realistic look at your finances, you can often find ways to come up with the money to pay debts off without the help of anyone else. Doing so helps you keep up good credit, or rebuild your credit if it is imperfect.