The latest issue of Kiplinger’s has a big section on debt reduction, including a list of tips for getting rid of whatever debt you might have. While a number of the tips are pretty standard stuff stiff, I still thought they were worth highlighting, especially given the current economic climate.
- Break your debt into small pieces. Whether you choose to pay highest interest or lowest balance first, it’s important to view your debts individually rather than looking at the whole, depressing ball of wax. The key is to stay current on everything, but focus on knocking out one chunk at a time.
- Track your spending. While you may often run out of money before you run out of month, you probably have more money coming in than you think. By tracking every penny that you spend, you can get a better idea of where everything is going, hopefully cut some extraneous expenditures such that you can throw a bit extra at your debts.
- Don’t miss any payments. As I said in #2, above, it’s important to stay current on all of your debts. You have a tough enough job ahead of you. Don’t harder by adding penalty fees and higher interest rates to the mix. Also, if your credit score falls, you might wind up paying more for things like insurance.
- Boost your income. Cutting spending can only get you so far. Another great way to supercharge your debt reduction efforts is to increase your income. Pick up a second job or, at the very least, sell your extra stuff on eBay. Then take whatever extra income you generate and throw it at your debts.
- Get help. Honestly, I have a tough time with this one as a blanket tip, as there are so many credit repaid and debt reduction scams out there. However, if you’re in over your head, you should consider getting help from a reputable credit counseling agency or financial planner. You can start your search for a decent agency at NFCC or the AICCCA.
To these, I would add… Stick to it. No matter how good your plan, it won’t work if you don’t see it through to the end. This is easier said than done, so take Step #1 very seriously. If you need the psychological boost, definitely consider attacking the smallest balances first to get a few small victories under your belt.
O and #6 don’t add to it.
Good advice. I’d also recommend listening to Dave Ramsey’s show. Even if you don’t listen to every bit of his advice you’ll at least get the right mind set and it will help to keep you focused. Hearing about how much trouble people get themselves into really puts perspective on your own spending.
As in a lot of things in life, the hardest part is actually starting off. Once I’d started tracking my spending, it actually started dropping even before I’d made any decisions on my budget.
So what can you do when you have missed a payment (or two)? I got laid off and I honestly couldn’t make the payments. The calls are driving us crazy!
Getting debt free is a very simple process but no one ever said it would be easy. The simple part would be setting up a plan but the hard part is sticking to it when the tough times hit. Those that have great success have the strong ablity to follow through with whatever they do.
He who can do that can hold the world in there hands.
I think that folks often discount the value of reducing debt.
Althought the math is fairly simple, many of us fail to realize that reducing debt offers a guaranteed rate of return on every dollar “invested”.
Man, you are do right on. This seems very simple, however it isn’t. If we all just did this for 3 months, I think we would all be amazed. Thanks for the post.