The Path to Lower Debt |
By Kenneth Long on October 15, 2010
.jpg.aspx) Lower debt balances is a more feasible goal for many who are just trying to gain control of their debt. While most advice focuses on paying off debt entirely, sometimes it is difficult to think about such a long term goal.
The path to lower debt can include a number of steps that can make it easier to reduce your balances and therefore easier to pay. It is just as much about reducing finance charges as it is providing greater monthly payment flexibility. Therefore, you may wish to consider these tips to lower debt to help you in the shorter term.
Cut One Unnecessary Expense
When you are struggling to break even each month, you need to clear out a bit of breathing room. Find one expense that can be lowered or cut entirely to help improve your budget. Here are some examples:
- Eliminate a premium channel from your cable or satellite bill ($12 savings).
- Use coupons when grocery shopping ($10-50 savings).
- Disconnect home phone and rely on cellular phone ($40 savings).
Find a Little Victory
We all know that you should choose the debt with the highest interest rate to throw extra money at. However, if that debt has a high balance, it can be difficult to see any movement on that balance even when making higher payments.
Instead, sometimes we need the instant gratification of seeing immediate progress. To accomplish this, look for the account with the smallest balance. Make higher payment on that account until you pay it off. Consider that minimum payments on a store card with a $400 balance could take a couple of years. Sending $75 a month as opposed to $20 will allow you to pay it off in less than 6 months.
Imagine how you will feel knowing that one card is out of the way. By doing so, you just lowered your monthly required minimum payments and you have reduced your risk of default. One more account paid off is one less account that can incur late fees.
Find Your Next Target
Choosing your next account may be easier knowing that you have what it takes to pay one off. You can take on a greater challenge by tackling your highest interest rate account. Alternatively, you may choose another little victory by selecting an account with the lowest balance. Remember, you are in control and it is your choice how you want to proceed to lower your debt.
Avoid Incurring More Debt
Paying off one account means nothing if your other debt balances go up. You must discipline yourself to limit charges, relying instead on cash or use of your debit card to pay for your expenses.
Find Small Rewards
Some people can give up all rewards, focusing intently on repaying debt. For the rest of us, we still need to enjoy life and occasionally need a small perk in order to feel satisfied.
A trip to Vegas or taking the family to Disney World is probably going to break the bank. Instead, think of lower cost ways that you can reward yourself. One great solution is to treat your family to a dinner and movie out every time that an account is paid off. For larger debts, you could do this every time you lower your debt to a certain point. Those small rewards can be easier to manage, and they can help us avoid larger temptations that arise when we deny ourselves for too long!
Be Honest with Yourself
If you already are having trouble making ends meet, you might need help. Examples include continued charging of gasoline or groceries to credit cards or an inability to pay more than $50 above the minimum payment. If this sounds like you, your path towards lower debt will likely need to pass through a credit counseling agency.
A structured debt management program may even provide the lower consolidated payment you were looking for in a consolidation loan, yet without the credit requirements of a lender. For more information, talk with an Accredited Financial Counselor to see what help you might be eligible for.
Debtors Unite provides additional tips on how you can lower your debt, pay off accounts and reach your financial goals. Get help with debt from a trusted provider who can show you the options for reaching your goals.
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