Back in the day, when someone wanted to buy something, they saved up for it. It just wasn’t done to go into debt – that was seen as the height of irresponsibility. Modern ideas about debt are very different, and this is a ‘buy now, pay later’ society. The result is that many families are now so deeply in debt that it will take years to pay off what they owe. However, there are some strategies you can follow to reduce consumer debt.
List your debts
Make a list of everything you owe, along with interest rates and minimum payments. Before you can tackle the debt problem, you need to know how much you owe. The result may be daunting, but once you set about your debt reduction strategy, the numbers will soon go down. Use the list to record payments – seeing your debt reduce will motivate you to keep going.
Work out a budget
This is the boring bit, but it’s a necessary step to debt reduction. Balance your income against your expenses, and work out how much money is left over each month for debt reduction. Even a small extra payment will help to reduce your debts, so pay off as much as you can each month.
Examine your spending
There are sure to be ways you can cut down on your spending. Take a packed lunch to work instead of eating out, walk instead of taking the car, buy store own brands instead of premium brands – if you sit and think about it, you’ll come up with more ways to cut spending and live within your budget.
Focus on a debt to clear
If you have several debts, it may seem like an impossible dream to repay them. However, if you settle on one debt, and concentrate on clearing that, you will soon see visible results. Some experts recommend paying off the debt with the highest interest – such as credit cards – first. This makes financial sense, as by clearing high interest debts you will be saving on interest and therefore paying out less.
Another school of thought is to tackle a small debt which can be paid off quickly. The theory behind this is that clearing a debt – however small – is motivational, and it will inspire you to carry on. Whichever strategy you adopt, settle on an amount you can pay back each month in addition to your normal commitments. When one debt is cleared, transfer that payment to the next.
Use extra money for debt reduction
If extra money comes your way, throw it in the direction of your debts. You may be able to generate extra money by holding a yard sale, or selling unwanted items on eBay. Channel the extra income towards debt reduction to make it work doubly hard for you.
Follow these strategies and you will soon see your consumer debt levels reduce. If you have a bad month, don’t stress over it and give up – everyone has bad months, but the committed debt strategist will put it behind them and carry on.