According to the data of TheAscent.com, the average credit card debt per cardholder was $6,028 about a year ago. Add to this the 2018 Consumer Financial Literacy Survey, which states 38% of household respondents carry debt from month to month – 13 % of them owed $5,000 or more. This supports the fact that you are not alone in debt; let’s discover how to reduce debt today.
Before moving to the remedies, you must know why it is critical to get out of debt. As we all know the debt is stressful, one who owes debt also owes stress, and stress brings numerous other problems like poor health, depression, and anxiety. In addition to this, with debt, you cannot achieve your financial goals, including down payment of home and putting a kid in college. Apart from this, big debt can leave you with low credit scores. Resultantly, lenders will keep inflicting high interest rates upon you whenever you need a mortgage or other loan.
However, the good news is you can get out of your debt no matter how hefty it is. Many people have already done that, even those paying off massive balances of more than $100,000. However, the more your debt, the more you will need to have a solid, detailed, and aggressive plan for a year or two.
Here are our 7 simple but effective ways you can reduce debt today and land you in a better and stable financial condition.
1. Pay off all debt using the debt snowball
Dave Ramsey presented a 7 baby steps formula that works every time, no matter how bigger the debt. The key idea in these steps was to use the debt snowball to pay off debt, it says:
- List your debts from smallest to largest, regardless of their interest rate.
- Pay the smallest debt first while making minimum payments on the rest of your debts.
- Repeat this method until the last debt is paid.
2. Economical living and smart shopping
- Start couponing if you are not doing it already. Showing a coupon to the cashier can save you a lot of cash.
- Try consignment shopping. Consignment stores sell pre-loved outfits in good condition at a nominal price.
- Cut the $100 cable bill and watch your favorite shows online.
- Stop going out to eat.
- Plan your grocery trips and stick to your budget.
3. Set your financial goals
Concrete goals can always serve as motivation, and motivation is all that you need. Always set the following goals before you start paying off your debts.
- Big financial goals: Bigger goals like a nice home or world trip can inspire you to get rid of your debt quickly.
- Debt-reduction goals: Separate the debt into manageable chunks and then plan to pay it.
- Credit-score goals: Note your credit score, decide where you will take it, and track your progress.
4. Spend less and earn more
This is a rule of thumb, but still, people do not give it enough consideration. Here are some ways to spend less and earn more:
- Stop subscriptions like gym etc.
- Only buy what you need, not what you want.
- Do not go to the malls and store for entertainment
- Consider working at a local retailer or home
- Sell unnecessary items in your basement or garage
- Ask for a raise in income
5. Do not make decisions in a rash
When under stress, people usually make the mistake of taking higher interest loans and being broke. Rather, in need, use a personal loan, home equity loan, or line of credit.
6. Stop investing
Yes, you read it right. Do not even think of investing and pay all your income to get out of the debt. Once you are out of debt and have saved the expenses of three to six months, you can resume your investments.
7. Make a budget and tell your kids too
Budget your day-to-day spending and be open about it with your kids. The magic word of “no” can assist you a lot, so use it excessively.
These are our 7 most useful ways to dodge the bullet of being broke due to debt. Many used it and came out of debt quickly. Now it is your turn to get your name written on the list of those people.