Consumer debt is the easiest debt to accumulate when you buy on impulse or once had a more luxurious lifestyle that has led to thoughtless spending habits. Nonetheless it is useful to know steps for reducing your consumer debt even if you feel like you will never get out of it unless you hit the jackpot at the casino.
Step 1: Determine your yearly and monthly expenditures.
It is easy to forget yearly and monthly expenditure such as income tax, college fees and mortgages. Instead of working those into the budget, people are likely to delve into their savings or take up loan payment systems when the time comes to pay up for these hefty amounts. Indeed, some folks do not even remember that they exist to eat into their budget.
Even if you have some savings and assets to liquidate, you must remember that if you do not curb your expenditure on consumer goods, you are likely to increase your consumer debt one day to a state of bankruptcy. That despondent state can happen to anyone – to those who are already poor, to the middle class spendthrift, to the flamboyant millionaire with a concubine in every state.
Step 2: Determine your budget on consumer goods.
If you are technology-inclined, you can create a simple Excel spreadsheet to enable you to determine these figures easily. In determining your monthly budget, first estimate your yearly budget, then subtract all the major bills such as taxes, college fees and home mortgages. Next, divide the remaining amount by twelve to get your monthly budget.
Subtract your monthly expenditures such as water and electrical bills rounded to the next higher ten dollars rather than down, babysitter’s fees and allowances for your family members. The remaining amount is what you have for your monthly budget on meals and consumer goods. Estimate and deduct the amount for meals and you have the final amount for your monthly budget to spend on consumer goods.
Step 3: Educate your family.
The head of the household may be thrifty but his dependents can rob him of his coffin. It is therefore important to educate the whole family on the measures to take to get out of consumer debt. Otherwise, you are only fighting fire just to see another fire started elsewhere.
Step 4: Take proactive measures to curb spending.
Get rid of your credit card. Spending on credit is the easiest way to accumulate consumer debt especially when you do not keep track of your expenditure. It is easy to make a budget and a shopping list and be tempted into buying goods that you have no immediate need for, just because there is a fifty percent discount on them.
Reduce the credit limit. Owning a credit card can have certain advantages if you can control yourself. Lowering the credit limit is one way that you can help ensure that you spend within your means. Certain credit cards help you accumulate credit dollars as you use them, and if you can learn to discipline your spending, not only will you not hit your lower credit limit, you may also save a few cents here and there and accumulate a few dollars per month.
Assess your expenditure patterns. You will probably realize when you do, that a large proportion of your consumer debt went to mindless spending, often on impulse when you feel low, at a sale, and with friends who are extremely persuasive. You may want to leave your credit card and auto-payment card behind when you go out, thus ensuring that you do not spend beyond your means.
Step 5: Liquidate and spend from the money obtained.
Sell what you do not need. Instead of delving into your next salary, keep that amount to offset your consumer debt. Look around the house. You are likely to find items that you have no need of. Sell them at eBay, thrift shops, flea markets or garage sales. Bring someone who will not allow you to spend the money obtained, to hold the purse. Otherwise after selling your stuff, you may spend on unnecessary items.
Step 6: Start a savings account.
If you have not done so, get one as quickly as possible, even when you are in debt. The faster you jump on the idea of saving, the faster you will get out of your consumer debt. You can do only one or the other with your salary: save it or spend it. Having a savings account forces you to look hard and fast at how you will spend your money so that you have some savings.
Step 7. Curb your desire to spend on consumer goods.
Dine in as often as you can. Think home and quality family time. Once you get rid of the consumerism effects, you are on your way out of your consumer debt misery.