4 Ways to Reduce Personal Debt

Debt is one thing most people have in common but unfortunately, some have more than others. If you are weighed down in personal debt and feel as though you are drowning in it, again, you are not alone. The bad news is, you will have to work at pulling yourself up. The good news is, there are ways you can reduce your personal debt. While it may take a while, depending on the amount you owe, there are ways you can slowly begin to chip away at it while bringing up your credit score at the same time. Here are a few suggestions.

 

1. Don’t Add to Your Misery!

The very first thing you need to do is stop going further into debt. Stop buying things you can’t afford and for certain you should rip up literally every credit card you still hold except for one you may want to keep in reserve for those very real emergencies that crop up. Just make sure never to use it unless there is no other way to pay for something which meets the criteria of being an emergency.

 

2. Choose One Debt to Focus On

While you will need to whittle away at all your debt, choose one bill to pay off quicker than the rest. Prioritize that one creditor or account you don’t want to lose in the future and pay more than the minimum monthly amount. In fact, it’s always best if you can pay more than the minimum payment due because interest will keep compounding on your unpaid total, but always pay extra on the one bill you’ve chosen to prioritize.

 

3. Find Cheaper Options Where Available

As an example, take your health insurance policy. Can you find a cheaper alternative to what you are currently paying for? One company, Health Insurance Innovations, is growing by leaps and bounds because they offer cheaper insurance online to give millions of Americans cheaper rates for the exact same coverage. This is one bill you can’t avoid, but at least find cheaper premiums so that you have more to pay elsewhere.

 

4. Set Aside a Savings Account

You should also plan to set something aside each and every month into a savings account that you will not touch under any circumstances short of a real emergency. The benefit of saving money for emergencies over using credit cards is that you will not be paying interest on top of money you spend. That one credit card may come in handy for an emergency, but if you can pay cash because of your rainy-day fund, you won’t be adding debt you are trying to recover from.

Finally, you will always be advised to set a budget and stick to it religiously. That is good advice, but few people actually follow it. You really should budget your time and money more efficiently, but when all else fails, the one thing to remember is that you are trying to reduce or eliminate debt, so don’t spend money frivolously. If you have extra money at the end of each month, tuck it away into savings or put some of it on that prioritized debt. Always remember that consistency is the key to debt reduction.

 

Featured image source: Royalty Free Photo

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