Debt Reduction Strategies

If you're in debt and feel that you can't escape, here are some powerful debt reduction strategies.

1) Face Up To Your Debts

One of the most important debt reduction strategies is to know how much you owe. Facing a problem is the first step to solving it. Working out the total amount that you owe is also a sign that you're genuinely committed to these debt reduction strategies.

It might come as an unpleasant shock to discover the true size of your debt, but unless you know how much you owe, the rest of these debt reduction strategies are worthless. So gather together all your financial statements, unpaid bills and invoices. Then take a piece of paper and make a list of everything you owe.

For each debt, include the following details;

The account number or invoice reference number

The creditor's name (or company name)

The total amount due

The regular monthly payment (or minimum monthly payment)

The interest rate (use the APR figure)

The next payment date

The additional financial charges or penalties for late payment

Then take a deep breath and work out how much you owe. If it's more than you imagined, just bear in mind that you've faced up to your problem and taken the first step to eliminate your debts.

2) Feed Your Desire To Get Out Of Debt

There's no point trying to use these debt reduction strategies unless you're committed to repaying the money that you owe. So let's supercharge your desire to get out of debt.

Right, I want you to close your eyes and imagine a big, red burning globe in front of you. That's your debt.

That's the thing that's responsible for much of the misery in your life. That's the reason you never have enough money to do the things that you want to. That's the reason you work long hours yet have little to show for it.

You hate that fiery red ball. You want to destroy that globe of misery. And it's your aim to make it smaller and smaller every month until it disappears.

So from now on, take a couple of minutes everyday to visualise that red ball. Feel the hate towards it. Feel the anger that you've allowed yourself to get into that position. And finally, feel your desire to keep going until you become totally free of debt. And do that everyday until your debts are history.

3) Motivate Yourself To Keep Going

Keep a running total of all your debts. Every month after you've made your debt repayments, recalculate the total amount that you owe. To do this, take your total debt from the month before, include any interest or penalties that have been added to your debts, and then deduct the total amount that you've paid towards your debts during the month.

This will give you something to focus on. Make it your aim to reduce the size of your overall debt month by month. And whenever you feel a drop in your desire to get out of debt, look at your debt shrinking month by month. Remind yourself why you wanted to become debt free and get excited at the prospect of your debts getting smaller and smaller.

4) Payment Techiques

a) Pay as much as you can towards your debts each month. Set yourself a monthly repayment budget and aim to repay that amount each and every month.

b) Pay the minimum amount on each of your debts each month (to avoid any penalties, threatening letters, reposessions etc), then use the rest of your monthly budget to repay the debt that carries the highest rate of interest (the one with the highest APR).

Keep doing this until the debt with the highest rate of interest disappears and then focus on repaying the debt with the next highest rate of interest. This will reduce the overall amount of interest that you pay on your debts.

c) Don't ease up on your efforts until all your debts are gone. Just because you've repaid a few of your bills, don't reduce the amount that you repay towards your debts every month.

Keep repaying the same amount month in month out until you become debt free. This will speed up the repayment of your debts and help you save on interest payments. Every time a debt is eliminated, it will leave more of your monthly repayment budget to repay the remaining debts.

5) Plan For The Future

Aim to live within your income. If you consistently spend more than you earn, your debts will get progressively larger. On the other hand, if you spend less than you earn each month, your debt will shrink until it is eventually eliminated.

Change your spending habits. Limit your spending to essential items and eliminate impulse purchases. Focus on buying what you need instead of what you want.

Set yourself both short-term and long-term financial goals. A good short term goal is to avoid adding to your debt. Every day that your debt doesn't grow gives you time to reduce your debt.

Cut up your credit cards and close any other sources of credit that you have. Give yourself a monthly allowance for living expenses. Draw out the set amount in cash at the start of each month and stick to it rigidly. If you don't have enough cash to buy something, then you can't afford it. Learn to anticipate future expenses, so that you can put aside enough money to pay for them without borrowing.

As far as long-term financial goals are concerned, set yourself a realistic length of time to eliminate your debts. Check your progress on a regular basis and above all, remember why you want to destroy your debt.

by Stuart Laing

Copyright (c) Get Out Of Debt.

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