Category: Reduce Debt

Top Tips to Reduce your Debt

There are many people that are in debt but would like to reduce how much they owe. Sometimes owing money is not a bad thing, perhaps when you have a student loan so that you can get more qualifications to get a better job or get a mortgage so that you can stop paying rent and own your own property. However, sometimes we can accumulate a level of debt that we are uncomfortable with or that we find difficult to manage and then it is time to think about how to reduce it.

Make sure that you are not accumulating debt before you start thinking about paying any off. You do not want to pay off one debt with another unless you can make significant savings this way. So do not make a big repayment on your credit card, find you cannot make ends meet and use an overdraft at the end of the month. This will be more expensive. Be sensible about what you are doing and you may find you need to stop using your credit cards, perhaps putting them in a drawer or cutting them up, to help you o remember not to use them.

The easiest place to start is your savings account. Have a look and see if you have any savings that you can use to pay off debts. This can be hard as you may feel that you want those to fall back on or you are saving for something specific. However, if you pay off your debt with it, in most cases you will be better off financially. You can work this out by comparing how much you are paying out on your debt, in interest and fees and how much you are receiving on your savings. Normally you will be receiving less interest on a savings account than you are paying out on your loans so it will make sense to pay off the loans with the savings.

It is wise to look at your debts and find out which is costing you the most. This might be taken as meaning financially and, yes, it is wise to find the most expensive, but there may be some payday loans which are worrying you more than others. Think about which you would like to pay off first both in terms of the cost, with it making financial sense to pay off the dearest first but also with regards to how you feel. Some people like to clear the smallest debts first so they feel that they are actually wiping out specific loans quickly and that motivates them to keep going. Others prefer to clear ones that worry them the most, perhaps money they owe to friends or family which they feel guilty about.

It is then important to look at how you manage your money on a monthly or weekly basis. You need to take a look at what money you have coming in and what you spend and see how well you balance that. Some people balance it easily and have plenty left over. If this is the case for you then you can use the money you have left over to start to repay your debts. However, many people will find that they do not have much left over, if anything at all and that is why they are in debt in the first place.

You will therefore need to start to budget your money so that you will have some extra to start paying off the debts. The more you concentrate on it, the easier it will become so do not get disheartened if you are only repaying a little to start with as it should get easier and you should be able to pay more later. As you pay off debts, you will have less interest to pay overall and therefore more money to pay other debts off.

You may need to look for way that you could earn some extra money so that you have more to put towards paying off your debt. It may be possible for you to take on more work, perhaps doing more hours in your current job or taking on some work in another job, maybe in another company or freelancing or working from home. You may also need to look for ways to cut down how much you are spending. Perhaps switching to cheaper products, buying less things and generally reducing your standard of living so that you have more money left to pay off your debts can also be worth considering.