Debt Reduction

Debt reduction begins with you. As easy as it is to look at all the external reasons why you are in debt – loss of a job, medical bills, rent increase, car accident – you cannot give away your control over your debt or it will defeat you.

To help you work through the situation, take time to review your current debts and determine how to eliminate them once and for all.

Take an Honest Look at Your Spending Habits 

This is the most difficult part of debt reduction for many people, because it requires them to take a closer look at how they actually spend their income.

Start by determining your monthly cash inflow from every source – paycheck(s), unemployment, social security, alimony, child support, or whatever. Determine how much you actually have available to pay for your monthly expenses.

Next, develop a list of mandatory expenses, such as mortgage, utilities, and car note, as well as a list of non-mandatory expenses, such as cable, magazine subscriptions, and morning lattes. Your responsibility is to take a closer look at your spending habits and, with a critical eye, eliminate those that you honestly don’t need.

Yes, it will require sacrifices. However, once you have control of your spending, you can get out of debt quicker.

Review Your Credit Card Debt 

Credit cards are one of the easiest things to use and one of the toughest things to pay off, because they are so easy to use. Unfortunately, when you get into massive credit card debt, you suffer the most. Thank goodness, the Bankruptcy Act of 1869 ended debtor’s prison.

If your goal is truly to get out of debt, one of the biggest steps you need to take is to pay off all your credit cards and then put them away for emergency situations only. That doesn’t mean a shoe sale!

While it is best to pay at least twice the minimum due each month, you may want to focus on a single card and pay even more to eliminate the debt faster.

Don’t Be Swayed by Debt Reduction Schemes 

No matter what anyone tells you, debt reduction takes time. There is no overnight fix. While credit counseling, debt management programs, debt consolidation, and debt settlement are all tools to help you regain your financial freedom, debt reduction requires commitment.

Consider these steps to help you toward reducing your debt:

  • •Reduce expenses. While you give some thought to eliminating those things you don’t need, you also may want look at where you can reduce costs by doing things such as changing your car insurance to a less expensive carrier.
  • •Increase income. This is tougher than reducing expenses. However, consider carefully whether you can work more hours, find a second job, sell unwanted items around the house, or identify other streams of income.
  • •Reduce interest. Too many people don’t realize that it is okay to ask their credit card company for a reduced interest rate. While there is no guarantee they will grant your request, it doesn’t hurt to ask. And if you they don’t reduce your interest rate, you may want to shop around for a better deal with a different credit card company. Then transfer your balances.
  • •Seek help. If at the end of the day you find yourself still struggling to get your debt under control, seek professional help. Debt counseling, management, consolidation, and settlement are better options than bankruptcy.

Debt Reduction Disclosure Requirements

If you decide to take the road to debt reduction by reaching out for professional assistance, keep in mind that debt settlement companies must:

  • Explain their fees and conditions for using their service
  • •Tell you how long it will take to get results
  • •Notify you of the amount of money or the percentage of each outstanding debt you must save before they will make an offer to your creditors
  • Describe the possible consequences of not making payments to your creditors, should they instruct you to do so

Debt reduction is a long process. However, it is worth the time and effort to regain control of your financial life.

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