It’s one of the unfortunate aspects of being an adult – accumulating debt. If you are in debt, you probably didn’t start out as an adult with the goal of having as much debt as you currently have, and it most likely didn’t grow to the level it is overnight. If you want to get rid of the debt once and for all, you may want to use some of these ten tips for aggressive debt reduction.
1. Know what your total debt is so you know what you have to repay. Write down on a sheet of paper a list of all your creditors, the total amount owed, and what your minimum payments are for each. This list will give you a roadmap of how to get out of debt.
2. Do not incur additional credit card debt. If you have to, place your credit cards in a zip top bag filled with water and place it in the freezer so you don’t have easy access to it.
3. Create a realistic budget for expenses. List necessities such as mortgage, car payments, utilities, insurances, groceries, etc. as well as credit cards. Decide how best to spend your money to meet all of those financial needs. Stay within your budget.
4. Use extra income for debt repayment. Instead of spending that money, you may want to use all or part of it for debt reduction.
5. Be sure to continue to make all regular monthly payments on each credit card. You do not want to fall behind on any of them because it will reflect poorly on your credit history.
6. Pay off the credit card with the highest interest rate first unless there is one card that has a balance over 50% of your credit limit. In this case, you’d want to pay down this credit card until it gets to a balance of less than 50% of the limit. Then you’ll work to pay off the card with the highest interest rate. When you have that card paid off, close the account and cut up the card. Next you’ll roll that payment onto the card with the next highest interest rate. Continue this pattern – paying off one card and then adding that payment to the next card – until all of your credit card balances are paid off and there is only one card left.
7. Use cash instead of credit cards. For the one card you keep, use it only for emergencies or major purchases such as a new dishwasher. Put it somewhere in your wallet that will help you avoid using it for daily purchases. Do not accept increases to your credit limit.
8. Reduce discretionary spending such as dining out, gourmet coffee, or other unnecessary items. A family of four generally spends $30 for a meal. Four meals over the course of a month would be an extra $120 you could use to pay on credit cards or put into a saving account.
9. Avoid borrowing money from another source to pay off debt, especially organizations that promise to consolidate debt. This means to combine debt could lead you to lose everything if you can’t keep up with your payments.
10. Look for ways to come up with extra money. This could be stopping some services, moving to a smaller home, selling items you no longer use, or getting a part-time job.
It is possible to spend your money wisely and get out of debt. Use these ten tips for aggressive debt reduction to encourage you to begin making changes in the way you spend and save.
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