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Debt Reduction Strategies

Posted In:  debt reduction

Getting out of debt is something that everyone ought to strive for.  In a volatile economy, it is very important to steer clear of debt so that you stay afloat. Here are some important debt reduction tips that will enable you to get a grip on your finances and live debt free.

Put a Good Budget in Place

Any plan that will be successful in reducing debt will have to have a good budget behind it. Not only will this enable you to actually see where your money is going, but it will also give you more money each month toward reducing your debt.

You will need to set up an accurate budget and watch where your money is going. Most people spend a lot more money on things each month that they really do not need. If you will determine to bring your money under control and get out of debt, then you will find it much easier to live on your paycheck. Without making up your mind, however, you will most likely still read the sale papers - and go shopping - which creates more debt.

Refuse to Charge Anymore

You can start to reduce credit debt when you get serious about it. Dave Ramsey, who has a nationally syndicated radio show that deals with finances, says on his website that:

"Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you're in debt then you're a slave, in the sense that you do not have the freedom to use your money to help change your family tree."

He then goes on to say:

"It takes a lot of will, discipline, courage and help to slay the debt monster. But it can be done. Imagine how much you could put toward retirement if you just didn't have a stinking car payment? This is how the wealthy build their wealth."

Pay Off Your Bills

The next thing you need to do is to form a plan about how you are going to reduce your bills. Here are some tips:

1. Determine which bills have the highest interest

Make a list of all your bills and their interest rate. You will need this in order to reduce your debt in the next step.

2. Reduce your interest rates where possible

If you are able, get a new balance transfer credit card with 0% APR interest for one year and put all outstanding credit on it. Only do this, though, if you are willing to destroy your old credit cards so that they are not maxed out again.

If you cannot do this, then call up the credit card company and try to get reduced interest rates. Many of them will do this for you - but you will never know if you can get this benefit if you never call. Why not call them today - why pay more in interest than you have to? 

3.  Know what your minimum payments are each month

In order to keep your credit score intact - or make it better - you will need to pay the minimum payment each month on every bill. In addition, make sure to make your payments on time, too, because many credit card companies are putting people into a 29%+ interest rate just for one late payment!

4. Pay off the bill with the highest interest rate first

Then, on the bill with your highest interest rate, pay as much as you can about the minimum to get the faster debt reduction you want.

Create an Emergency Fund

It is also very important that you have an emergency fund on the side. Just in case there should ever be financial difficulties in the future, an emergency fund may be enough to keep your credit score intact - and your checks from bouncing. It is a good idea to build your emergency fund - while paying off your debts – to about three month’s worth of income, or more.

Living without debt is one freedom that many people in this country no longer experience – by their own choice. You can, however, begin to ring those bells of freedom and slowly remove those chains of financial bondage. Why not start today to make a difference and determine to become debt-free - as soon as possible.