5 Easy Tips To Help You Reduce Debt
Know the exact amount of debt you have:
This can be a real eye opener but is crucial to know how much you actually owe in order to make a plan to repay the debt. Many people just focus on the minimum payment amount on credit card bills and ignore the whole credit card bill. Finding out how much you owe and how much interest banks charge you can be a real motivator to pay off your debt quicker. Don’t be discouraged when you see the total amount; try to see it as motivator to get out of debt and spend your money on something more worthwhile than interest rates.
Set up a realistic repayment plan:
This is not as difficult as it may sound, but it's crucial to eliminating your debt as quickly as possible. Write down your expenses and highlight which ones are unnecessary. Cutting back is a good first step and the savings can be used to pay off your debt instead. One popular method is to pay off smaller amounts of debt first while paying the minimum on larger debts. If you have savings, use them to pay off your debts quicker.
Shop around for better deals:
Now that you have a spending system in place to pay up your debt, call your creditors. It always pays to ask for cheaper interest rates on a loan, credit card, insurance or mortgage. You can also ask a financial advisor to help you find the best deals to suit your circumstances.
Decrease your credit limit:
As you pay off your outstanding balance, it’s a good idea to decrease your credit card limit. This will give you a sense of achievement and also prevent from running into so much bad debt again.
Consolidate your debt:
Sometimes it's worth moving all your outstanding balances into a low interest personal loan or card. This will drastically reduce the interest you are paying and free up some cash. That said, be careful not to spend the extra cash again on ‘bad debt’. It could be enough spare cash to run up some ‘good debt’ such as an investment property.