How to Cut Debt in Half
Debt is any money owed by you to other parties. When you have debt, paying down the money you owe can seem like an insurmountable task. Cutting debt in half requires establishing a plan to reduce the amount you owe and the discipline to stick to that plan. Depending on your personal financial situation, you can cut debt in half anywhere from a few days to a few years.
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Instructions
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1
Make a list of all your debt. Look at the statements from any creditor including mortgages, car loans, student loans, credit cards, lines of credit and other debt. Make a list of all your debt and what the interest rates are on each of those debts. Add all the debts together and divide that number by 2. This is your target debt goal.
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2
Look at all the statements and bills you have and determine your total monthly expenses and how much money you have coming in each month. Add all your monthly expenses together, and add all your monthly income together. Subtract your total monthly expenses from your total monthly income. This is the amount you currently have remaining each month to pay down debt.
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Pay the leftover amount from Step 2 toward your debt each month to begin cutting your debt in half. Pay down your debt on the loans and credit cards with the highest interest rates first.
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4
Consolidate your high-interest debt onto low-interest loans and credit cards.
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5
Reduce your monthly expenses by cutting down on non-essential items such as travel, gasoline and entertainment. Pay this extra money toward cutting your debt.
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Increase your monthly income by taking on another form of employment or taking on odd jobs. Use this additional income toward paying debt.
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Clean out your savings accounts and pay that money toward your debt. Your debt costs you more money in interest rates than your savings accounts earn you.
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