Strategies for Lowering your Debt

Getting out of debt is a long and tedious process. Fortunately, debt reduction isn’t as complicated as most people think. In order to be debt-free, you have to abide by the principles of smart money management such as budgeting, living below your means and not spending money you don’t have.

Needless to say, you should practice smart money management on a constant and continuing basis – which perhaps makes debt reduction complicated for most people.

Hence, the following are simple strategies on how you can lower your debt, month after month.

Assess your current financial position – how much is your total assets and liabilities?

In order to lower your debt, you first assess your current financial position. Determine exactly how much is your total assets and total liabilities. List down on paper all your obligations and expenses opposite to your assets such as the value of your home and/or your car, your cash deposits and your investments in stocks, if any. Ideally, your assets should be worth more than your liabilities.

Prioritize your debts based on interest rates, type of credit, creditors etc.

After assessing your financial position, you can now work on prioritizing your debts. It is recommended to prioritize debts which have higher interest rates – by doing so, you free yourself from bigger interest expenses.

Nevertheless, you should also consider other factors such as the type of credit or the person/commercial entity to whom (which) you are indebted to.

Regularly allocate a portion of your monthly income on paying debts

A simple yet proven debt reduction strategy is to regularly allocate a portion of your monthly income on paying off your debts. Reducing your debt won’t be a sprint – it’s going to be a marathon. By employing a slow yet steady approach in debt reduction, you avoid any additional financial lapses while still maintaining a decent quality of life.

Learn to budget – control your spending

Budgeting is another effective approach to debt reduction. Through budgeting, you can determine the exact amount of money you’ll allocate for paying debts. While it’s difficult to stick to a budget, the ability to do so is critical in reducing your debt.

Look for ways to earn additional income

Earning additional income is another good strategy when dealing with huge debt. There are a lot of ways on how you can earn additional income both online and offline. You can try writing, editing or doing other paid tasks online. Similarly, you can enter direct selling or even MLMs offline.