Debt can be reduced!!


With a little dedication and proper planning, it is possible to reduce your debts on your own. Why pay debt consultants for things you can do yourself? I’ll show you the tricks and the fastest way to reduce your debts on your own.

Step 1: Re-evaluate your debts
Collect all your financial documents and print out your credit reports to see exactly where you stand. This is an important step toward debt management and one that people are often afraid to take. On a sheet of paper, write down your balances, interest rates, and monthly amount due for each of your debts. Include your car loans, personal loans, credit cards, and other debts. You should also make note of any annual fees on your credit cards. For all of these loans, you need to focus on loans with the highest interest rates.

Step 2: Look at your budget
Once you have collected and confirmed the information about your debts, you should take a look at your monthly budget. Note down your monthly income after taxes and subtract your rent/mortgage payment from this figure and other monthly expenses such as childcare, education loan payments, insurance, utilities, and groceries. Once you have subtracted all of your expenses, calculate how much is left to pay off your debts. If this amount is too small, look for ways to reduce your spending. The more you can pay towards your debts each month, the sooner you will be debt free.

Step 3: Create a plan
Now that you know all about your financial situation, it’s time to create a plan for reducing your debts. Use your information from Step 1 and 2 to fill in the following chart. Subtract your minimum debt payments (Step 1) and monthly expenses (Step 2) from your monthly income after taxes. The remaining amount should be used to pay off the debt with the highest interest rate and the highest balance.

Example:  Your Plan
Monthly income after taxes   – $2,800 $
Minimum debt payments (1) – $1,800 – $
Monthly expenses (2)             –  $400 – $
Remaining amount goes to the debt with the highest rate and balance = $600 = $

Continue this cycle each month until the debt is paid off and then move on to the next highest rate/balance account. This may seem like an odd process, but it is the fastest way to reduce your debts. All this while, you should not add any new charges to your credit cards. Also, try to increase the amount you pay toward the most expensive debt each month. Track your progress with a chart like this:

Month 1    Month 2      Month 3    Month 4      Month 5       Month 6
Payment Goal     $600           $600          $625           $625            $650            $650
Actual Payment  $625

Month 1    Month 2   Month 3            Month 4       Month 5
Payment Goal     $600          $600         $625

Actual Payment  $625

Step 4: Start negotiations
While you are starting to follow your repayment plan from Step 3, you should contact your lenders to see if you can improve the terms on your debts. You may be able to lower your interest rates or negotiate a reduced settlement on some debts by speaking with the customer service department. It is especially easy to negotiate the terms of debts that are charged off (dismissed) by the lender or in collections already. Also think about moving some of your credit card debts to new accounts with lower interest rates. Moving a balance to a credit card with a 0% introductory rate for 6-12 months can help you save a lot on interest. Just be sure to keep each of your credit card balances below 35% of the credit limits to avoid damaging your credit score. While doing so, investigate if consolidating your debts into a personal loan or home equity loan could help too.

Step 5: Follow-through
Do your best to meet your repayment goals each month. It’s okay if the amount you put toward your most expensive debt each month varies. Just try to consistently put as much as possible toward your debts. Signing up for an automated payment system and keeping a chart of your progress on the refrigerator can help you stay on track. When you reach major milestones, be sure to celebrate your success. Before you know it, you’ll be debt free!



Here are ways to help get your financial life back on track and put you in control of your financial future.
Stop spending: Get your spending under control so you don’t add to your debt going forward. If possible, stop unnecessary spending.

What’s unnecessary? Learn to tell your needs from your wants – your phone bill now two months in arrears versus that cutting-edge cool smartphone, for example. Many people hit financial trouble by spending to reward themselves with items they really don’t need.

Start saving a preset amount monthly and don’t spend impulsively, then plan how to adjust fixed and discretionary spending if you truly want an item.

List everything you owe: List the amount you owe, the minimum monthly payment the creditor expects and the interest rate on each account.

Clearly laying this information out helps you prioritize individual expenses and get a better perspective on your whole debt.

Decide how much money you can comfortably allocate. If you followed step one above, you may have a few extra dollars for reducing your debt. Now fine-tune your budget; save a few dollars here and there by cutting back.

Do you really need the extra-large café latte or will a regular coffee suffice? Do you really need $100 or $200 designer jeans or will $30 or $40 Levi’s work? Remember, debt discipline always means recognizing your needs and wants.

If you are serious about reducing personal debt, seriously trim your personal budget to free the monies you need for more rapid debt reduction. Just as you wrote a list of debts, write down what you save – a month’s tally will surprise you.

Pay off debt with the highest interest first. Make at least minimum payments on every account.

Choose the highest-interest credit card or other debt and concentrate all available debt-reduction dollars to pay off that first. Keep making minimum required payments on all other accounts until you pay off the first.

Pay off the smallest balance account next. Concentrating all available monies on this smaller balance next pays it off in no time – then you enjoy two accounts paid off and you’re on your way to success with debt reduction.
Alternate between paying off the highest interest debt, then the smallest balance accounts until you pay off every one of them. When you get completely debt free, celebrate. Take pride in this accomplishment that eludes many others.

Now you know how to continue to discipline your spending and live within your means. You also increase the odds you never face a major debt problem again.


4 thoughts on “Debt can be reduced!!

  1. Pingback: 7 ways to deal with your Debt, your Relationship and your Mental Health |

  2. Pingback: College diploma? Check. College debt? Double-check to make sure the bill gets … – Dallas Morning News | Russ Finance

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