Everyone has debt. In fact, some debt is to be expected and can be great for your credit rating. However, when that debt starts to outweigh your income, cause stress, or increase to an amount that you’re unable to repay in a timely fashion, that’s when there’s a problem. There are a lot of reasons that people end up with so much debt. The loss of a job, a breakup, the death of a loved one, or simply poor financial decisions can cause you to get in way over your head. Fortunately, there is a way to dig yourself out and start anew. Below are some tried and true strategies used to reduce household debt.
Review Your Debt for Solutions
Do you have any idea how much debt you’re dealing with or why the amount is so high? If not, this is a great place to start. What you find may surprise you. For example, perhaps your mortgage payments are too much because of high interest rates or long terms. Your credit card balances might be so high because the minimum payment is barely enough to chip away at the principal balance. As you review your debts, here are some strategies you might use to reduce them.
- Refinance – One of the first options to consider is refinancing. This is especially a good idea for those who have high interest and long-term mortgages. You can find a company like Eagle Home Mortgage who can offer you a mortgage at a lower interest rate and for a shorter period of time. This would save you on interests and allow you to start tackling that larger principal balance quicker.
- Pay More than the Minimum – Credit card companies provide a minimum payment requirement to their customers, but it isn’t the best deal. When you pay the minimum, you’re essentially going to be paying on interest a lot longer. It is best to start chipping away at that big credit card bill by paying more than the minimum. Whether it’s $10 or $50 more per month, it can reduce your interest and lower the balance faster.
- Talk with Your Lender/Credit Card Company – Believe it or not, the further you go into debt, the worse it is for lenders and credit card companies. As they want to keep their cash flow in the green, most are willing to work with their customers to get the debt repaid. Contact your lenders and credit card companies to find out if you can reduce the interest rate or reduce the total amount due by eliminating late fees that may have been tacked on.
- Ask for Help – If your debt has gotten to the point that you’re in dire straights it’s time to get help. You can gain tips and motivation from personal finance blogs, or you could speak with a debt counselor or financial advisor on how to get rid of debt faster.
Look at Your Finances
If you’ve tried all of the above but don’t seem to be getting the relief you’d hoped for, maybe the problem is a bit deeper. It may be necessary for you to look into your personal finances and reconsider some of your spending habits. Some areas for improvement might include:
- Eating out – If you’re spending a couple of bucks on lunch every day and then ordering takeout on the weekends you’re wasting a lot of money. Take a brown bag lunch and look up recipes to make dinner more enjoyable.
- Grocery Shopping – Clipping coupons and buying generic brands instead of major brands can help to cut your grocery bill in half.
- Technology – If you’ve got home internet services, its time to ditch the unlimited data plans on your cell phone bill. With so many locations offering free wi-fi to patrons, there’s really no need to spend and extra $50 to $100 a month for data.
- Entertainment – Obviously, life would be pretty boring if you just sat in the house all day, however, that doesn’t mean you have to spend an arm and a leg on entertainment. Look for free things to do in your area like festivals, fairs, and other activities. You can also check to see if there are online coupons you can use if you’re going to go somewhere.
If you want to reduce or eliminate your household debts, you have to look closely both at your debts and your personal finances to see where relief may be (or problems may lie). Look for opportunities to reduce your debt while also being mindful of your everyday spending. By reducing the principal balance, interest rates, and unnecessary spending, you can get your debts paid off sooner rather than later.
Rachel Slifka is a freelance writer and human resources professional. She is passionate about helping fellow millennials find success with their finances and careers. Read more by checking out her website at RachelSlifka.com.