Most people carry some form of debt. It’s often necessary in order to pay for larger items, such as a house, education, or a car. But sometimes we let debt get a bit out of hand. This happens when we start racking up credit card bills, and other forms of high interest debt. If you’ve already tried creating a budget, but still find yourself struggling to make payments, it’s time to really hunker down to do something about your debt.
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5 Tips To Reduce Debt
1. Don’t Increase Your Debt Load
This can be an extremely difficult process. You need to buy certain things in life in order to survive. If you don’t have a ton of cash on hand, the easiest way to afford things is to use debt. But this is a dangerous cycle—especially if you’re already in a precarious financial situation. It’s not a bad idea to get rid of, or freeze, your credit cards. This will take away the option for you to pile more debt onto your already unmanageable load.
2. Pay Off One Account at a Time
Many financial professionals suggest that you try to pay off one debt load in full as opposed to trying to do them all at once. Of course, you’ll still need to at least make minimum payments on all your accounts. There are two main methods for paying off your debt in this way:
- Pay off your highest interest rate debt first. This will probably be credit cards, or possibly some other form, like a payday loan. The higher the interest is on a debt, the more you’re going to have to pay over time. Eliminating that debt sooner can potentially save you a ton of money in the long term.
- Use the positive psychology of “snowballing.” For some people, aiming for the most difficult debts first will only result in them losing hope. The snowball method advises people to pay of their smallest debts first, then work up the ladder. This momentum can help people gain confidence in their ability to pay off their loans. However, taking this approach will likely be the more expensive route, as it doesn’t account for interest rates.
3. Try Negotiating Your Debt
Sometimes lenders will work with you if they see that you’re in a bad financial situation. They want to get their money as much as you want to get out of debt. It’s possible that you’ll be able to negotiate the terms of your loans to a more achievable payment structure.
You can also consider transferring your credit card debt to another card with a lower introductory interest rate—sometimes even zero percent. This lets you catch up on repayment without having to worry about interest for a period of time. If you take this approach, however, you should note that balance transfers usually come with a fee. Also, you’ll want to do your best to pay down your debts during this grace period because those low interest rates won’t last forever.
4. Work with Debt Professionals
If you’ve tried all these things, it’s probably time to ask for some serious help. Fortunately, you’re not alone. There are organizations specifically designed to help consumers get control of their debt. Freedom Debt Relief is one of the most respected debt negotiation companies in the U.S. They have a long track record of working with lenders to help clients get back in control of their loans. Many people are even able to get out of debt entirely in as little as 24-48 months.
5. Cut Costs Wherever Possible
Maybe you’ve already done some proactive work in reducing your expenses. However, there’s almost always more ways to lower overall spending. By cutting your costs, you’ll be much more likely to get yourself out of debt. Here are a few ideas for how you can spend less money:
- Sell your car and use public transportation. This won’t be an option for people where there isn’t readily available public transport. But for those living in cities, public transit provides a much less expensive alternative to getting around. Plus, you can get a good chunk of cash for selling your vehicle.
- Be conscious of your utilities. Don’t crank up the heat in the middle of winter, or leave the lights on when you go out. Conserving energy will also save your finances.
- Get rid of unused memberships. This can include gyms, streaming platforms, or anything else. You don’t need to cancel everything. But you’re just throwing away money if you’re not actively using these services.
It doesn’t feel good to be too deep in debt. Oftentimes it seems as though there’s no escape from this hole that’s ruining your life. But don’t give up. There are still ways you can get your finances back on track if you take the right actions.