In the modern era where credit cards are so convenient, loans are so common and debt is socially acceptable, it’s extremely easy to get into debt. I still have vivid memories of the two people that sold me on my college credit card. It has the school logo on there and best of all, it helps the school every time I use it. How cool is that?
Get Out of Debt Now with These Tips
Avoiding debt is an advice that most don’t appreciate enough until we are swamped with bills and obligations. For years, many of us just pay the minimum payment on our credit cards and we think our house is an ATM machine.
Now that our economy is deteriorating and people are worried about their jobs, we are finally thinking about the debt that we carry. 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 debt repayment success. 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 it is, 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 starting 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 rewards but it’s clearly not for everyone. If you have a hard time keeping yourself from splurging, just freeze them!
- Constant Reminder – 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 quicker. 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 not 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 just will go away by itself and start dealing with it. Debt is a problem. Start reducing it 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 it 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 payment would be a dream come true for credit card companies. Do you really want them to make money on your dime?
- 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 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 it’s 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 car 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 different credit card 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 Unneeded Stuff – On ebay, craigslist, or anywhere you can. In addition, record the purchase price, selling price and the difference. The total of the difference is how much you have spent for temporary owning all these products. Now, tell your family that number.
- Credit Cards are Loans – Credit card is not cash. Drill it in your hand 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 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!
Promote or Save This Article
If you like this article, please consider bookmarking or helping us promote it!
Print Post | Email Post | Del.icio.us | Stumble it! | Reddit |
Related Posts
- Thank You for Confirming…
- Best of Personal Finance Blog by MoneyNing – April 2009
- Good Debt and Bad Debt
- I’m Writing a Frugal Book
- Debt Snowball – Highest Interest vs Smallest Loans First
Subscribe! (and Get a Mini-Course with Free Registration)
Follow me on twitter! In addition, subscribe to grab free amazing content or take advantage of the newsletter to have content delivered to you. For starters, a 7-part mini course to help you spend less and be happy will be delivered to you when you subscribe!(Don't worry about spam, because we hate it as much as you do!)
Twitter
Facebook
Subscribe
{ 12 comments… read them below or add one }
Awesome list!
My favorite is “Take Ownership”. To me this is the most crucial step and comes before all else. Definitely bookmarking this list for later reference!
Good advice. In particular, I like the idea of finding a side job…you need to maximize your income in every way. I also agree that setting a budget is key! (I would say that is number 1) Cut spending and spend wisely!
Motivation is always key, and think it should extend to more than just reducing debt. Even though it’s a huge goal, it’s still getting rid of something negative, you should also set a positive reward up for yourself so you can budget as well.
I really like #17 – I have a tendency to plan for the once a month payment, but you’re right, that the interest is calculated based on daily amounts, so the sooner you get it in the better. But I would also add #26, that you need a plan for STAYING out of debt, because otherwise it’s so easy to get back into the debt mess. It may take a while to really be completely free of debt – our incomes and expenses need to catch up with our lifestyles, and we need to manage this balance – but we need to start that process first or at the same time as paying off debt.
Great post — stumbled!
Great advice. It is important to differential the “NEED” and “WANT” items. Don’t simply purchase the items just because you WANT it and you don’t need it. Be a smart consumer and don’t waste any single penny.
Those are all excellent tips that I am sure will help the debtors immensely. This is the first time I have heard about getting a debt reduction buddy and I think it is a brilliant idea. This will motivate each other on their journey together to the land of the debt free.
An Excellent tips. I like #20, Credit cards is not really good. We are in the middle of crisis now, I think it’s time to watch our needs, be particular on prices and be reasonable on things that you needs.
Oh my that’s a lot of tips! Thanks for that, I think this can help out a friend of mine who’s deep in debt. I always keep telling her to freeze (actually, literally CUT) her credit cards because that’s what got her in that situation in the first place.
great list. My family and I are very aggressively attacking our debt and we are doing many of the things you’ve suggested.
Re: #1–the prize, I spend time every day (even if it’s just a few moments) imagining in real terms what it will be like to be debt free. How I will open the mail with no sense of dread. How I will pack our suitcases for a trip knowing its all paid for. How i will see significant numbers in my checking and investment accounts. How I will walk into my dream home the very first time–what it will feel like, smell like, look like…I try to make it real.
I frequently blog on using our dreams to motivate us in the difficult tasks of changing our financial behaviors.
Thanks for this great post, this is my first time to your site and I will visit again. Thanks
Morgan at TheDebtDance.com
The post is really very enjoyable as well as informative. Here you have given 25 tips to reduce debt. Few tips seem to be very effective to me. You told about the part time job. I know, this is a good way to get out of debt, but this is not very easy for those person who are already engaged in a profession. According to me, setting a budget for your family is the best way to pay your debts fast. I will also help you to prevent debt in future.
I have a budget for years and a side job. But there’s some other way to make more money. You can play with the idea of having your own business, may a home business. This can be part of ‘take ownership’, part of the game, not just an outsider.
Paying up debt is just like trying to get richer. There’re 3 options for you.
(1) Reduce the expenses,
(2) Increase the incomes, and
(3) Reduce the expenses and increase the incomes at the same time.
I just love the third one.