Most American families carry debt, whether it’s the $10,000 in credit card debt or the $60,000 in student loans, but at some point, the amount of debt can grow until it becomes unmanageable. It is possible to get out of debt quickly, but it requires a bit of discipline and commitment; as an incentive, you may want to set a motivational reward such as a vacation or special dinner to help keep you on track to tackle your debts. Here are a few measures to help you reduce your debt quickly:
5 Tips for Tackling Personal Debt
1. Track Your Spending & Evaluate Your Expenses
Write down everything you spend, including monthly bills, groceries, fast food, manicures, every trip to Starbucks, entertainment…all. How much of what you spent actually paid for necessities? How much went toward luxury items? Did you still have money left over for emergencies and savings?
2. Assess Your Total Debt
Most Americans are not aware of the total dollar amount of their debt, however, calculating your total debt will give you a clear picture of how much you need to pay off to become financially free. Gather
together all of your credit card, installment loan, line of credit and mortgage statements and determine exactly how much you really owe. Make a list of your debts, organize them from lowest to highest balance and according to their level of interest.
3. Determine How Much You Can Put Towards Debt
Write down how much you bring in from all sources of income, and how much you need for things like groceries, gas, utilities, child care and other non-debt expenses. Subtract your expenses from your total income to determine how much you currently have available to pay down debts.
4. Make a Plan to Pay
Set a Budget
A budget is simply a tool to help you attain your financial goals through careful assessment of your personal finances. A budget is not set in stone – it is important to review and revise it often so that it fully reflects your changing needs or goals.
Tackle Lowest Amount or Highest Interest Debt First
If there aren’t enough dollars to go around, carefully prioritize what bills to pay first and when. For example, you may want to consider paying off highest interest debts, whose total amount is rapidly increasing or the smallest balances you owe first. A combination of payments to high interest debt and small balances will help to pay down debts quickly while capping the growth of other debts.
Speak With the Experts
Notify your creditors; they may even have more realistic options available for you to lower your debt. Speak with a credit counselor, debt management specialist or financial advisor for education, assistance with negotiation or arbitration or input on the designs of your personal debt payment plan.
5. Find More Funds to Pay
Cut Non-Debt Expenses
How can you reduce expenses in the future? Try saving on utility bills by regulating your thermostat or by turning off lights when you leave a room. Pass on dinners out and eat meals at home or make your own lunch for work days. Save on entertainment by renting a movie and buying popcorn.
Earn More Income
Come up for other ideas for earning extra income to help you reduce your debt quickly. Consider taking a part-time job or doing freelance work for a fee. Sell some used sports gear, collectibles or name-brand clothing. Have a yard sale. Or help your neighbors with yard work or childcare – any of these steps may provide extra income which you can apply to your debt.
Tackling your personal debt may seem like an insurmountable challenge, but with some
knowledgeable skills, discipline and commitment to the task, you can take steps to address your
debts in a way that makes sense for your budget and financial goals. And Be sure to take
advantage of modern technology – there are a number of online and mobile applications, such
asMint.com and BudgetTracker, which can help you track spending, set financial goals and design a
budget.