It’s simple to get into debt. Debt relief is a another matter. While there is no easy or quick solution to get out of debt, a solid plan can help you stop making those regular payments.
Plans for getting rid of debt might be active or passive, much like investing in equities.
Which of these two approaches is better for you, though?
How to find out is provided here. Make a spreadsheet document with the names of the creditors you frequently work with before implementing any plan. Next, make a table with the amounts owed in one column, the required minimum payments in another, and the interest rate in a third. Every time you make a payment, take the appropriate amount off.
Let’s now go over several debt reduction strategies you should think about.
Active Debt Reduction Techniques
1. If you can, increase every monthly payment by $100. Although this additional sum may seem like a lot of money, it will have a significant impact.
2. Establish and adhere to a budget. Although the word “budget” is frequently as well-known as the word “diet,” it is essential if you want to pay off your debt. Allow yourself an extra $30 each month for spending money when adding a sum to the “monthly expenditure” part of your budget. Don’t worry, this amount will go up as you pay off your debt!
3. Bid adieu to eating establishments, even those morning lattes! Spending even a small amount on food or drink in a bar, café, or restaurant can have a significant impact. Think about it: if you only spend $5 a day on coffee, that’s an extra $35 per week, or $1,825 per year, that you might be putting in your pocket.
4. Consolidate. Consider moving to a less expensive location if your rent is high. Review your choices for refinancing your mortgage if you own. You can use the additional money to pay down your bills if you save $100 or more each month.
5. Put in extra time. Instead than buying new stuff with the extra cash, pay off your debts.
Techniques for Passive Debt Reduction
1. If you have balances on credit cards with high APRs, think about switching them to cards with 0% introductory APRs. If you receive these offers in the mail, begin the application process—but only after you’ve looked over the associated charges. These days, the price for almost all of these deals is 5% of the transferred balance. You might save a lot of money by transferring your debt, but check sure the savings outweigh the balance transfer fees.
2. Pay attention to the credit card with the highest APR. Spend additional funds on this debt total. The debt avalanche method involves paying off one card before moving on to the next and so forth.
3. Pay in cash at all times. Purchasing something using a credit card is simple. This is particularly true if you were able to clear some room on one card. Use the spending money you’ve set aside for shopping to stifle the impulse. Do not spend any more after this money is gone.
4. Recycle used apparel. They are the clothes you keep in the back of your closet but never wear. You might find things if you take them out that you didn’t even realize you possessed. (Advantage: Sell everything you’re positive you won’t need and use the proceeds to pay off debt.)
5. Avoid taking out any new loans unless you can consolidate your existing debts to lower your monthly payments and lower your interest costs.
It’s up to you whether you take an aggressive or quiet stance. You can achieve your goals more quickly by taking an aggressive budget reduction approach, but some people find it difficult to stick to or even afford.
The most crucial thing to keep in mind is to refrain from using credit cards, taking out more loans, or skipping payments. There is a nice roadway in the distance, but debt reduction is a lengthy and difficult road to go!