DIY Reduce Your Debt

Face your debt first, and then develop a strategy to reduce your balances.

A solid plan can help reduce your debt. The rate that you're able to pay down balances depends largely on how much debt you carry, and how much you're willing to sacrifice. Debt elimination is a process, and you shouldn't expect overnight results. Develop a realistic plan, put it into action and slowly watch your debt disappear.

Instructions

1. Add up your debt totals. Lay out your statements, and then record your debts and balances on a spreadsheet. Calculate the totals to know exact what you owe.

2. Track your expenditures to see where your money goes. Review your bank statements, credit card statements for the month and receipts to assess miscellaneous spending. Tally how much you spend a month on extras such as retail shopping, dining out and recreation.

3. Reduce spending to help reduce your debt. The less you spend, the more funds you have available for debt elimination. Resolve to spend less and drastically reduce how much you spend each month on non-essentials. For example, instead of dining out three nights a week or eating out for lunch everyday, dine out only one night a week and bring a lunch to work.

4. Increase payments to creditors and lenders. Reducing debt fast will involve higher payments or increasing the frequency of payments. If the minimum on your credit card is $40 a month, send your creditor $80 a month or $120 a month to pay down the principal. Consider bi-weekly credit card payments to reduce how much you pay in interest, which also helps reduce the principal balance sooner.

5. Ask creditors for an interest rate reduction. Lower how much you owe in interest each month with a better interest rate on your credit cards. Credit card interest affects how fast you're able to reduce debt. The more interest you owe, due to a higher rate, the slower you pay down the principal.

Tips & Warnings

• Late payments or non-payments can result in an interest rate increase, which can slow your debt eliminate efforts.

References

• Bankrate; 7 Steps to Eliminate Your Debt; Scott Bilker
• Today Show; Lower Credit Card Debt with Bi-weekly Payments; Jean Chatzsky; March 2006