How to Reduce Debt Quickly

The average credit card debt of the American family today is $8000. This and other debts can be very hard to pay off for many people. This article looks at ways of reducing credit card and other debts quickly and easily.

Difficulty: Moderate

Instructions

Things You'll Need:

• Calculator
• Bills
• Shopping list
• Balance sheet

1. First of all, a good idea is to make a balance sheet including all outgoing and incoming money to your home. Include things such as bills, groceries and any other major and regular costs that you have. This makes it easy to see if you are spending any excess in any particular area.

2. 
    

   If there are any glaringly obvious areas where you are spending more then you need to be, then these should be addressed as soon as possible. For example if you drive a 7 seat SUV and only ever drive it to work and back, then trading for a smaller vehicle is a good idea. Similarly if you have things such as magazine subscriptions, or cable packages full of channels that you don't watch then these should be changed also.

3. 
    

   Next you should make a list of all the various interest rates that your various debts have. Certain debts such as credit card bills will tend to have much higher rates than other things. The bills with the highest interest rate should be prioritized for paying off first. To this end, reduce all other bills to the minimum payments you can make and use all the extra money on eliminating the highest debt first. After this do the same with the next lowest and so on.

4. 
    

   Research tax credits and deductions available for the coming tax season, and try to exploit as many of them as you can. You will often find that there are many more then you might be currently claiming, and of course saving more money on taxes will give you more to reduce your debts.

5. If you are paying out more every month than you can handle, then a debt consolidation loan might be a good idea. Some of these are a ripoff and will leave you paying off the debt for years and years, although there are some genuine companies out there still. Many government and local councils have schemes offering these kinds of loans, and they are often at reduced rates of interest in order to let people pay them off more easily and get out of debt.

6. 
    

   Making savings across the board is a good way to having extra money for debt reduction. This can be on things such as lower insurance costs due to driving a more efficient vehicle, or even groceries. Remember that in some parts of the world people still live in mud huts, so getting a cheaper brand of cereal isn't that great of a sacrifice in the grand scheme of things.

Tips & Warnings

• Getting a second job not only makes you more, but leaves you less free time to spend unnecessarily.
• Always make sure the interest rate of any debt consolidation loans you get aren't too high.

[Temcat]

on 4/30/2009 Very good article on reducing debt. Very needed in these times. 5*

[Delaplane]

on 4/29/2009 Thank you for the great tips on how to reduce deby quickly.