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Debt Reduction Strategies
By Molly's Brother | August 15, 2006
I was flipping through my blog and realized that I haven’t written about debt reduction strategies in a while. Below you’ll find some key steps in the path to debt reduction.
Track Your Spending You need to know how much money you have coming in every month and you need to know where that money is going. Get a spending log and track every penny. After you’ve tracked your spending for 30 to 45 days, you’ll be able to sit down and figure out a budget (trimming the fat–the unnecessary expenses–along the way). With this newly created budget, don’t forget to pay yourself first.
Figure Out How Much You Owe At the same time you track your spending, sit down and figure out how much money you owe and find out who you owe the money to. Write down every outstanding loan on a piece of paper. Include your car payment, school loans, credit card loans and money owed to friends and family (among others). Also, call your credit card companies to see if they’ll lower your interest rates (APR). This could end up saving you thousands of dollars down the road.
Stop Spending Let’s be honest, spending is what got you into debt. The only way to get out of debt is by stopping the financial deluge.
Prioritize Your Debts & Structure Your Payments Once you’ve tracked your spending and figured out how much money you owe, create and stick to a budget. Part of this budget is going to be focused on debt reduction. So structure your payments. You might want to look into Dave Ramsey’s Debt Snowball or David Bach’s Debt Free Solution.
Find More Money & Make More Money You can find extra money by selling gift cards for cash, by having a garage sale, or posting items for sale on CraigsList or eBay. Sell old clothes. Sell books. Offer your services as the neighborhood babysitter. Get an extra job. Do whatever you can to find money. Now.
Stay The Course Stay the course. It won’t be easy, but stay focused. If you fall off track, don’t be too hard on yourself. Just regroup and attack your debt with a newfound ferocity.
It’s important to remember these strategies–along with the countless others not mentioned–regardless of where you are in your own debt reduction process. It helps you to stay focused and to stop living life overextended, overstressed, and overspent.
Topics: Debt, Personal Finance, Spending Log, Your Budget |