Personal Debt Reduction Strategies

These days more people than ever before have personal debt. Unlike a secure mortgage debt or business loan personal debt does not offer any long term advantage. The more interest is paid out on a debt the more an individual’s financial position weakens. By following some simple debt reduction strategies it is possible to turn this kind of situation around.

Before setting out on strategies it’s important to have an accurate view of your financial situation. Without this it will be impossible to make debt reduction strategies which are efficient. Use a spreadsheet to correlate and cross reference all financial information. Map out your income, expenses, debts and the interest being paid on those debts.

With your financial situation laid out before you in black and white start applying strategies to make change happen. The best strategy to adopt first is to reduce your expenses.

Identify waste before you start to worry about making sacrifices. Examples of wasting money are paying over the odds for items instead of looking further for better deals or purchasing items which are not needed. Many people fall into the habit of spending money when they are bored, sad or lonely. This impulse spending not only wastes money but the initial problems are not dealt with either. If you feel the urge to spend money stop and ask yourself why you want to spend. You could go for a walk, meet a friend or make inroads into a new activity rather than distracting yourself with spending. Not only will you save money but you will also be happier.

A lot of wasteful spending is merely habitual and so it feels hard to give things up even when the items do not enhance your life at all. If something is hard to give up recognise that buying it is a bad habit and establish a new, good habit to replace it. For example if you buy something expensive to mark every payday then think up a way to revel in incoming funds without wasting a chunk of them.

Once wasteful spending is dealt with you should examine how to reduce the expenses which cannot be written off. These include rent, bills and grocery shopping. Rent can be reduced by moving to less spacious accommodation in a less desirable area. For example if you live in prime commuter territory then you are probably paying a premium for this location. Bills can be reduced by being prudent with energy and carefully considering service providers.

Grocery shopping is something which spirals out of control when you go shopping without a definite plan. Know what you are going to buy before you shop and plan out a few days at least involving the same ingredients. Buying meal by meal may be convenient but again convenience comes at a premium. Head to your local market to find good deals and if possible visit markets towards the end of the day when vendors are almost giving away produce. Ideally you should set a budget for your weekly or monthly grocery shop and stick within this.  

When you are trying to reduce personal debt you should see the purchases you make in terms of how they are slowing down your debt repayments and the extra interest that will be accrued. You wouldn’t pay ten times the market price for a cup of coffee but if you fall short on debt repayments in order to buy a latte every morning then this is what you could effectively be paying.

Another strategy to enable debt reduction is to increase earnings. People who enjoy their work are always going to find putting in extra hours easier and even find a bit of overtime is something they crave rather than dread. This scenario makes debt much less likely. If you don’t have a job you love you can still get more working hours into your days. Look around on the internet for earnings opportunities in your skill area or think of a way to get work for yourself locally or via a business endeavour.

A great boost to repayment goals is a sale of possessions. Everyone has something which they no longer use or have any emotional attachment to. Clothes, media such as DVDs or larger items such as furniture can all be sold at fairs, auction houses or auction websites.

A full on sale not only raises large sums of ready cash but it serves as reminder that the items you crave to purchase today can often end up being no more than a nuisance worth a fraction of their initial cost. This serves as a guide in the future when buying new things; are they going to be wanted as much in a few months or years time?

By reducing spending and increasing income your financial situation will change drastically. You should be spending less than you are earning every month. This difference between income and expenses is what you will use to make debt repayments. You can help yourself further by negotiating lower interest rates with your debtors.

Be careful to ensure that you send payments well in advance of the day they are due and always keep a financial cushion in your bank account in case of unforeseen problems. The charges for missing a debt payment and the charges for going into the red on a bank account are both steep and the combination can spell disaster for debt reduction. Be safe rather than sorry.

Reducing and ultimately eliminating debt opens up a new way of life where you are in control of what you spend and what you pay out. Changes can be difficult at first but you will be reaping the rewards when a new, debt free way of life is your reality. After your debt is paid off you can put some of your income into savings and investments, then companies can pay interest to you rather than sending you bills for it.