Reducing debt can be hard work.
Especially in today’s economy with job losses, gas prices all over the place, government actions that leave us guessing.
It’s no wonder that many American’s are up to their eyeballs in debt.
Debt is a lot like sleepwalking; you just wake up and have no idea how you got there. Scary.
Getting into debt is easy. It’s getting out of debt that’s the real challenge.
Don’t despair, you may still have options to turn this ship around.
A common strategy for reducing debt is to add a few more dollars towards a bill when it comes in the mail. That makes sense — you may down your debt quicker.
And then your other bill comes from that other credit card. You do the same thing.
Before you know it, you have extra money going towards each debt.
That sounds okay at first, but there are better ways.
Paying off the highest interest debt first will help reduce your debt the fastest. The catch to this strategy is to account for any ballooning rates. If the rates are fixed, this way will work — otherwise, it’s more complicated.
Changing your spending habits may be the best place to start. Log every purchase you make with the dollar amount. If you notice a reoccurring purchase that isn’t essential, eliminate it. Maybe it is that Starbucks Latte you drink every morning, it may be more economical for you to brew your own coffee every morning. You may look at this purchase as very minimal, but that coffee every day adds up and that is money you could be using to pay off your debt.
Make A Budget
Make a budget for yourself. This may be hard to do because you may be used to the lifestyle you were currently living. You may find that you sometimes make impulse purchases when you see a product that tickles your fancy. When this happens, you should think to yourself, do I really need this item? Is it essential to my everyday life?
Be honest with yourself, this could be a vital step to climbing your way out of the hole you have dug yourself. That lifestyle may be the one that got you into debt in the first place. Budgeting yourself, so that you only pay for what you really need, like food, rent, insurance, etc., and using the rest of your money to pay off your debt may be beneficial to you.
Create An Emergency Fund
Create an emergency fund. Even if you have crafted your well planned out budget, it may be in your best interest to have an emergency plan in place. Unexpected expenses may come about that will cause you to stray from your budget. These expenses could be medical bills or car expenses. They can come out of nowhere but you need to be prepared for them. To increase the likelihood of your emergency fund having enough money in it to bail you out when the time comes it may be beneficial for you to set it up in a high-interest savings account.
Reward yourself along the way.
Treat yourself to a steak dinner or a night out on the town. You’ll be amazed how much better it tastes and feels when you know you don’t have to pay for it later.
Do not go on an extravagant vacation or buy a new car. We’re talking reward system, not the lottery.
Now Go And Reduce Your Debt
Getting out of debt may be a tough and stressful task, but following these tips may help. If you are still unsure on the different tools that will help you get out of debt, consulting with a financial advisor may be a resource you should utilize.