Debt Reduction Tips
_If you’re considering debt reduction techniques to get rid of the amount of debt you currently have, then it’s important to acknowledge that the primary cause of most people’s debt problems is bad spending habits.
Many people may say that illness or a job loss is the cause of their debt problems, but the reality is that you are responsible for the debt contracts you signed that promise the bank or lender that you’ll repay the money you borrowed.
So in order to truly reduce your debt for good, there are three vital things you need to learn to control in order to succeed.
1. Work on and improve your own spending habits
2. Reduce your repayment costs as far as possible
3. Improve your income and expenditure ratio
Spending Habits
Banks love their customers to use credit cards for every day purchases. They make so much more profit if you believe it’s the ‘easy way’ to buy anything you want.
Unfortunately, we’ve all become so used to charging anything we want that we’re all able to have those luxury items whenever we feel like having them instead of when we truly need them.
Learning to only purchase those things you need and to only buy those things you can afford out of your own savings is a difficult task if you’ve been raised to use the plastic cards each time you want something, but it’s not impossible.
Another handy option for learning to control your own spending habits is to work your income backwards. You know how much you’re going to receive on payday, so deduct the amount of your bills and your current repayments. Then take a good look at the amount left over. This is how much you really can afford to spend.
If the amount you see is disappointingly low, then this could mean that your repayment amounts are eating away your income every month, so it’s time to get rid of those repayments to free up your income again.
Reduce Repayment Costs
Everyone knows that the interest charged on credit cards and consumer loans is outrageously high. You can reduce the interest rate you’re being charged quite simply, which in turn reduces the repayment amounts you’re expected to pay each month.
Call you current lenders and negotiate with them for reduced interest rates. If they won’t negotiate, then tell them you’ll take your business elsewhere. Then shop around until you find a bank that will offer you similar terms with reduced interest costs.
Once your repayment amounts have been reduced, you’ll find you have extra money left after you’ve paid bills and loan or credit card repayments. Use this extra money wisely. Either put some into savings or make some voluntary payments directly of your outstanding balances.
Improve Your Income and Expenditure Ratio
This is just a fancy way of saying reduce your living expenses and loan repayments however you can and try to increase your income even a little bit.
Negotiating for lower rates or rolling existing balances together into one consolidation loan is one way of reducing your monthly repayments. You should also try to work on reducing some of your regular living expenses just a little as well.
Most people are on fixed incomes with little hope of increasing their regular salary from work, but it is possible to find other ways to make a little extra money. You could sell a few unwanted items on eBay or hold a yard sale.
You might decide to operate a small internet business on weekends for a few extra dollars. You could do any number of small things designed to bring a little extra cash into your household to help you stay ahead financially and strengthen your overall position.
By working on these three things, you will find that your spending habits begin to change and the cycle of debt will eventually be broken. Once you understand the concept of only spending money you can afford to spend, you’ll begin to treat your goals toward debt reduction very differently.
Many people may say that illness or a job loss is the cause of their debt problems, but the reality is that you are responsible for the debt contracts you signed that promise the bank or lender that you’ll repay the money you borrowed.
So in order to truly reduce your debt for good, there are three vital things you need to learn to control in order to succeed.
1. Work on and improve your own spending habits
2. Reduce your repayment costs as far as possible
3. Improve your income and expenditure ratio
Spending Habits
Banks love their customers to use credit cards for every day purchases. They make so much more profit if you believe it’s the ‘easy way’ to buy anything you want.
Unfortunately, we’ve all become so used to charging anything we want that we’re all able to have those luxury items whenever we feel like having them instead of when we truly need them.
Learning to only purchase those things you need and to only buy those things you can afford out of your own savings is a difficult task if you’ve been raised to use the plastic cards each time you want something, but it’s not impossible.
Another handy option for learning to control your own spending habits is to work your income backwards. You know how much you’re going to receive on payday, so deduct the amount of your bills and your current repayments. Then take a good look at the amount left over. This is how much you really can afford to spend.
If the amount you see is disappointingly low, then this could mean that your repayment amounts are eating away your income every month, so it’s time to get rid of those repayments to free up your income again.
Reduce Repayment Costs
Everyone knows that the interest charged on credit cards and consumer loans is outrageously high. You can reduce the interest rate you’re being charged quite simply, which in turn reduces the repayment amounts you’re expected to pay each month.
Call you current lenders and negotiate with them for reduced interest rates. If they won’t negotiate, then tell them you’ll take your business elsewhere. Then shop around until you find a bank that will offer you similar terms with reduced interest costs.
Once your repayment amounts have been reduced, you’ll find you have extra money left after you’ve paid bills and loan or credit card repayments. Use this extra money wisely. Either put some into savings or make some voluntary payments directly of your outstanding balances.
Improve Your Income and Expenditure Ratio
This is just a fancy way of saying reduce your living expenses and loan repayments however you can and try to increase your income even a little bit.
Negotiating for lower rates or rolling existing balances together into one consolidation loan is one way of reducing your monthly repayments. You should also try to work on reducing some of your regular living expenses just a little as well.
Most people are on fixed incomes with little hope of increasing their regular salary from work, but it is possible to find other ways to make a little extra money. You could sell a few unwanted items on eBay or hold a yard sale.
You might decide to operate a small internet business on weekends for a few extra dollars. You could do any number of small things designed to bring a little extra cash into your household to help you stay ahead financially and strengthen your overall position.
By working on these three things, you will find that your spending habits begin to change and the cycle of debt will eventually be broken. Once you understand the concept of only spending money you can afford to spend, you’ll begin to treat your goals toward debt reduction very differently.