How to reduce debt? Here are some proven
bits of debt
reduction advice.
- Resist temptation. This is a prerequisite for debt
reduction.
Before buying, stop and consider if the item you covet is really
necessary. If the answer is a resounding "yes," then
investigate alternate price structures from competing products
or services. Is there a substitute that's just as good but
not as expensive.
- Stop using credit cards and start paying cash. You might
even consider canceling all but a few charge card accounts.
- Transfer high interest credit card balances to lower interest
accounts. Take the time to research the competition. Your savings
could translate into the thousands depending on how often or
how much you rely upon your credit cards as a part of your lifetstyle.
- Pay more than the monthly minimum required by your credit
card company. If you're paying the minimum, you're accruing interest
charges faster than you're paying down the principal. At that
rate, your debt will be around longer than you will.
- Pay off credit cards with the highest interest rates first.
Take a step by step approach toward eliminating your debt. List
your cards by highest interest rate and then pay them off in
order of the highest rate. If you have multiple cards and can't
seem to get your monthly balance reduced, analyze the rates and
try to work out a plan that allows you to make a dent in each
card's principal.
- Consider a Consolidation Loan. Look into low interest loans
that can be used to consolidate high interest credit balances.
This is a popular loan category for people with multiple credit
cards.
- Ease up on your IRA contributions. Consider cutting back
on contributions to your retirement savings plan and use the
extra funds to pay down debt. But make sure to first ask an account
administrator if you can adjust your contributions in the future.
- Limit the use of your ATM card, or at least regulate its
use. Most banks charge for cash withdrawals and these fees nibble
away at your bank account.
- Look into debt-management counseling. If you're overextended,
these no-cost or low-cost organizations can work deals with your
creditors to reduce monthly payments and help put you back on
track financially.
Finally, and perhaps the most important of debt
reduction strategies,
develop a specific monthly budget for you and/or your family.
This plan should address a plan of action that eliminates spending
on unnecessary goods and services. This might include foregoing
those Friday night pizzas, a few drinks at the bar, your premium
cable package - or even that morning cup of coffee. Developing
a clear picture of your financial situation will help pinpoint
the areas where debt can be reduced, and with it, the financial
stress in your life.
RESOURCES: Debt Reduction Advice
FTC Bureau
of Consumer Protection - Consumer Information: Credit & Loans
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and Score Information from Experian.com
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Personal Finance
Money Tip: Save as much as you can. You never know when
a financial emergency might come about, so make it a habit
to save as much of your money as you can, at least
10% of your monthly earnings. To achieve this, always give
yourself a 24-hour grace period before you decide to buy
anything. If you still want to buy it after 24 hours, then
go ahead. |
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