Debt is something that creeps on you slowly. It seems one day you owe out just a few thousand and the next time you add up the numbers you’re into the tens of thousands. If you’re living beyond your meanslike many Americans today, now is the time to reel in your spending and find ways to reduce or eliminate your bad debt.
Examine your interest rates
When was the last time you looked at a credit card bill, car payment, personal loan or your mortgage? If you’ve reviewed them occasionally, have you checked how much you pay each month just for the interest? If you have several credit cards, an auto loan, and a personal loan, chances are good that you are paying at least a few hundred dollars a month in interest alone. It’s worth checking to see if you can rework a loan to see if you can lower your monthly interest debt or transfer your credit card balance to a low- or zero- interest card. Then use the extra money to attack your remaining bills.
In an emergency
Things are starting to come together and then the AC goes out as a heat wave looms, or the car breaks down and needs repair. You could add it do your credit card and add a few bucks to the minimum payment for a few years, or maybe more than a few.
You can get a payday loan or go to the pawn shop and get caught up in the cycle of paying off the interest only every 30, 60 or 90 days while never touching the principal. However, some payday loan alternatives available to consumers have many fixed-term options available with a variety of repayment schedules. Giving you the needed cash with a preset amount to pay each month covering both principal and interest.
Create a budget
Ultimately, the answer to your high debt is to reduce your spending. The simplest and most effective way to achieve this is to establish a home budget. A budget does several things. First, it lets you see the numbers up close and personal, giving you a true and honest assessment of your debt. Secondly, it helps you to make better choices when it comes to spending money. Of course, a budget only works if you stick to it. Write down every bill and monthly obligation you have. Then factor in food, gas, school, and work expenses. Then finally, deduct your total net income from the combined number. This is the amount that you have left. Hopefully, you have money left over and you are not running in arrears each month. With the extra money you can use it to go directly towards your debt, one bill at a time.
Take on a second job
If after reviewing your budget the money left over is not enough to make it through each month, you could take on a second job. There are always part-time employment opportunities, with many offered online, allowing you to make extra cash from the comfort of your home. If online is not for you and you are handy, you could print up cards and do part time repairs or mow lawns.
Reduce overhead costs
The best way to speed up your recovery efforts is to reduce your debt sooner rather than later. This means that you’ll need to pull in your belt and get frugal with your money. Some quick ways to get extra money include reducing your cable bill to basic service and taking your cell phone to a lower monthly plan or switching to another company that offers a lower rate. You can also save money on your electric by lowering the heat and raising the air conditioning while you sleep or are away for more than a few hours. When you go food shopping, bring coupons and check the local flyers for sales on the items you need. If you eat out once a week, change it to once a month. All of these reductions will help you achieve your goal of becoming debt-free sooner.
There is good debt and bad debt. A mortgage is a form of good debt that pays dividends when you retire or sell your home. Having more than a few credit cards with high balances is bad debt and something you want to avoid. It isn’t difficult to reverse the problem of having too much bad debt. All it takes is the willingness to give up on the extra for the short term, to enjoy long-lasting financial success.