It's no secret that we're living in an increasingly indebted society, but that doesn't mean it has to be the only way. If you make the right choices in spending your money, you can significantly reduce your debt load without sacrificing your lifestyle. To help you out, we've compiled the top 10 ways to reduce debt faster and improve your finances.
1. Develop a Budget to Track Your Expenses to Reduce Debt Faster
If you're going to spend less, you'll need a budget. Every month, identify your fixed expenses that won't change and start figuring out the variable expenses you can cut back on. This will give you a better idea of where your money is going each month so that you can start revolutionizing your lifestyle.
2. Use Savings to Pay Down Larger Debts
Paying down a high-interest-rate debt with cash reserves makes sense because it stops the interest accrual on the large balance. You might feel it's comforting to have a lot of cash in your bank account, but it isn't working for you when interest rates are this low. Don't drain your savings. If you are sitting on a pile of cash, do pay off your debts using some of it to reduce debt faster.
3. Don’t Take on New Loans While Working on Paying off Old Ones
You should pay off any current debt before adding new debt. Avoid making unnecessary purchases. When you have a debt to repay, making unnecessary purchases will only make managing it more difficult.
4. Pay Your Bills in Full and on Time
You should consider your monthly spending if your debt feels overwhelming. Are there expenses you can cut back on or eliminate? If so, that will help revolutionize your finances. As long as we are careful about the choices we make in our everyday lives, we can reduce our monthly expenses and pay off debt faster than ever before!
5. Pay Your Bills in Full and on Time to Reduce Debt Faster
Pay your bills on time and in full to avoid high-interest rates and late fees. If you can't make full payments, aim to pay more than the minimum to avoid paying more in interest and fees.
6. Negotiate for a Lower Interest Rate
Be sure to contact your creditors to see if they can negotiate a lower interest rate with you. They will take your good payment history and account standing into consideration. If you've had a good relationship with your lender for a few years, you will likely be eligible for a lower interest rate. This will help you pay down that debt more quickly while saving you a ton on interest payments.
7. Consolidate Debts into One Loan
When you're facing more than one debt, consider consolidating. Consolidating lets you put all your debt into one monthly payment, often reducing the total cost you'll pay over time. Depending on how you plan to make the payment, you may be paying off this consolidation loan for a long time, so consider what these extended payments will do to your financial plan.
8. Check Your Credit Report
Contact one or more credit reporting agencies and request a free copy of your credit report. This will ensure that you haven't forgotten about an outstanding debt. On top of that, it's always smart to be cautious and keep an eye out for unknown accounts. If you want to find your credit score, ask your bank or credit card company to see if they offer a free credit score.
9. Pay More Than the Minimum Payment
Check your monthly budget and decide how much you can pay extra towards your debt. By paying more than the minimum, you'll save money on interest and see that you can get out of debt faster.
10. Stay Vigilant to Reduce Debt Faster
After you've paid off your balances or paid them down:
- Be mindful of what could happen and guard against incurring debt again.
- Consider phasing out credit cards and using debit cards or cash instead.
- Look for other ways to make an extra income from side hustles, like creating websites, sharing your skills, and dog walking.