With credit cards so convenient, loans so common and debt socially acceptable, getting into debt is extremely easy. I still have vivid memories of the two people who sold me on my college credit card. It had the school logo on there and best of all, it helped the school every time I use the card to pay for a purchase. How cool is that?
Get Out of Debt Now with These Tips
Avoiding debt is an advice most don’t appreciate until they are swamped with bills and obligations. For years, many just pay the minimum payment on their credit cards and think of their house as an ATM machine.
Now that the economy is deteriorating and people are worried about their jobs, everyone is finally thinking about debt load. If you are concerned about all the loans that you need to pay off, use the time you are worrying and spend some time implementing the following 25 tips to reduce your debt instead.
- Focus on the Prize – Motivation is key to succeeding with paying off your debt. Get a Post-It, write down your total debt and tape it on your computer monitor. Seeing the number go down is a huge motivator. Some people like to instead motivate themselves by looking at the reward (perhaps a picture of your happy family to remind you how relaxing being debt free can be). That works just as well.
- Debt Snowball – Some like to pay the highest interest rate first and others like to pay the smallest loans first. Whichever method you choose, debt snowball works because you are concentrating on one loan and the psychological benefit of paying them off helps tremendously.
- Get a Side Job – You are afraid of your job but how many of you are actually trying to get another job in this economy? Whether it’s building up some form of passive income or getting a part time job, side hustling is still the quickest way to make more money.
- Freeze Your Credit Cards – I personally think credit cards are great because of the rewards you earn but the plastic cards are clearly not for everyone. If you have a hard time keeping yourself from splurging, just freeze them.
- Have Constant Reminders – Reducing debt is a long journey that takes discipline. Whether it’s setting reminders on your calendar or setting an alarm on your phone to alert you to pay bills, anything you can do to trigger your mind about your path to financial freedom is encouraged (and sometimes necessary).
- Have a Regular Meeting About Debt – Schedule a monthly meeting with your family and figure out how to save more money and pay off your debt more rapidly. In the meeting, talk about your progress, dream up ideas and make some point form actions for the next 30 days.
- Take Ownership – The most important step in becoming debt free is taking responsibility. The credit card companies may have encouraged you through the years to limit your spending but it’s ultimately you who racked up those charges. Stop complaining and start doing something about it.
- Understand That This is a Problem – No company is ever going to keep lending you money forever and ever. Stop wishing that the problem will just go away by itself and start dealing with the situation. Debt is a problem. Start reducing what you owe immediately and stop thinking that you should drag it out infinitely.
- Learn the Power of Compounding Interest – I imagine that people who are in debt don’t really understand the essence of compound interest. Remember all those charts that show how interests compound when you invest? When you are in debt, this is just in reverse.
- Read the Fine Print – The majority of us don’t really pay attention to the fine print when we take a loan or apply for a credit card because those details are confusing and boring to read. Considering how much the detail can affect us (for examples, just look at all those people with rate adjustable mortgage rates), it might even make sense in some cases to hire someone to read and explain everything to you. Take some time to understand those documents and save yourself from a possible disaster.
- Mind the Small Fees – There’s no question that small fees add up. Couple bucks here, several meals there and you are looking at thousands and thousands of dollars each year. Every penny counts. Save them up and use it to repay your loans.
- Paying Minimum Payment Sucks – Everyone just paying the minimum amount due would be a dream come true for credit card companies. Do you really want them to make money off of you?
- Don’t Always Upgrade Your Lifestyle with Income Increases – It’s so easy to instantly upgrade your lifestyle whenever your income increases. Getting a raise or a promotion is such a happy event so even though celebrating is good and well deserved, imagine what you can do to your debt repayment schedule if you put those extra dollars at work.
- Start a Budget – People don’t budget because the task is boring but it absolutely works. Knowing where your money is going is the first step to figuring out how to save more money. More money saved, more money to repay loans.
- Don’t Keep Up with the Jones – When all your neighbors and friends are buying new cars and going out to fancy restaurants, it’s hard to just say no. However, which would you choose? A miserable retirement or a comfortable one?
- Fancy Doesn’t Mean Better – We’ve been taught to equate price to quality. If something is more expensive, it automatically means that it’s better right? You know what’s really better for you? Be debt free, that’s what.
- Send Micro Payments Instead of a Big One – Some loans compound daily (read the fine print to find out which ones, or you can always call and ask) so the sooner you can send in payment, the better. Instead of sending money once a month, try sending in smaller amounts whenever you have money to save on interest. Also, look for ways to cut down the delivery time. For example, online bill pay or online payment might be faster than mailing out a check, which cuts down the interest further.
- Consolidate Your Debt if Possible – Unless you can keep up with all the bills, sometimes it’s just easier to consolidate your debt. It might make sense to take a home equity loan for example to pay off all the different credit cards and auto loans if the interest works in your favor, not to mention that it’s much easier to manage one loan instead of six.
- Sell All the Stuff You Don’t Need – On ebay, craigslist, or anywhere you can. In addition, record the purchase price, selling price and the difference. Add up all the difference and you will know how much you have spent for temporary owning all these products. Now, tell your family that number.
- Credit Cards are Loans – The purchasing power of your credit card is not the same as cash (Even 0% balance transfer credit cards may come with a cost). Drill it in your head that using your card is borrowing money that needs to be repaid.
- Ask for a Lower Rate – Don’t be afraid to call your loan company up and try to negotiated. There is no shame and there is nothing to lose. Tell them why they should lower your rate and you might just succeed.
- Success Breeds Success – Start hanging around people with the right mindset. Tell your friends who don’t share the same values to stay away. The right support system will help you accomplish your goals much faster.
- Keep Trying to Trim Your Bills – Be persistent because there are always more ways to save money. Always.
- Make a Plan – The great thing about having a plan is that you get to see progress. I love it when I make a To-Do list and start crossing things out and I’m sure you will enjoy doing it as well.
- Find a Debt Reduction Buddy – The idea is the same as having frugal friends. Accountability and encouragement will go a long way in helping you on your path to become debt free. Find a buddy and help each other reduce your respective debts. Have another monthly meeting with him/her, share this article, talk about ways to save and inspire each other to be financially free.
Get started today.