If you have different bills and debts due, it does not take long to begin feeling a little overwhelmed by all the payments you need to make. Whether it is payday loans or credit card debt, they can soon stack up among day to day bills like rent and utilities. If you are feeling stressed, anxious, and unsure of what to do next with your debt, rest assured there is always a pathway to debt relief. No matter how bad you feel your financial situation is, there is a solution which is the first thing to recognize. One of the key steps to take is to try and reduce your debt. Being conscious of your income and spending in order to actively decrease your outgoings and increase your savings is crucial to debt reduction. So, how can I reduce my debt? In this article, we offer some key tips and tricks.
Pay more than your minimum payments
If you are just making the minimum payments on debts like credit cards, it can make it very difficult to chip away at the actual debt. Minimum payments will often only cover a portion of the interest rate, meaning the debt is simply able to grow and accumulate. In order to tackle the principal of the debt, a payment greater than the minimum must be made. This will help you to reduce your debt and get ahead.
Organize your debt by interest rates
One of the most important aspects of reducing your debt is understanding where you stand financially. The best way to do this is to make a list of your bills so that you can review your expenses. From here, order them according to their interest rate, highest to lowest. While ensuring all minimum payments are covered as a priority, you should then pay off the debt with the highest interest rate first, and work your way down. This will save you in interest payments long term.
Create a realistic budget
Reducing your debt will require discipline, beginning with creating a budget. Your budget should include all of your expenses, income, and savings to help you determine where you can cut back and where extra funds can go towards debt repayments. Allocate budgets for all areas of your life – groceries, entertainment, and so on, and stick to the allocated amount as much as you can. Try leaving the credit cards at home and pay using cash where you can to avoid temptation.
Establish an Emergency Savings Fund
If you are wondering ‘how can I reduce my debt?’, establishing an emergency safety fund as part of your budget is a great way to avoid incurring additional debt. An emergency is often considered an out of the ordinary expense that cannot be avoided, like a medical expense or car repair. By having a fund set aside, you will be prepared for if anything happens and you will not go further into debt to make the payment.
Reign in your lifestyle
If you are struggling with debt, stopping spending will likely help. Managing your lifestyle means cutting down on expensive habits and focusing on the essentials. This means reducing the amount of takeaway coffees, dining out, takeouts, and expensive entertainment. This will help you to stick to your budget, and will likely leave you with some extra funds to help reduce your debt.
Increase your income
Although this involves much more effort, increasing your income will help you to reduce your debt more quickly. Consider taking on extra shifts at work, or taking on dog walking or babysitting. You may have a hobby you can turn into a side hustle for any extra cash to put towards your debt. Try your hand at crafts to sell, or sell any items you no longer need on sites like Craigslist to get some quick cash.
Request lower interest rates on your credit cards
Sometimes, you can ask your bank or lender for a lower interest rate for your credit card. Often, lenders would rather reduce your interest rate than lose you as a customer. If they are unable to reduce your interest rate, think about a balance transfer to another credit card or financial institution. Be sure to consider any fees or penalties for transferring your balance before making a decision on whether or not it is the best thing to do to help with your debt.
Speak to a Licensed Insolvency Trustee
If you are still wondering ‘how can I reduce my debt?’, you may need a more extreme form of debt relief. At Spergel, our experienced Licensed Insolvency Trustees can review your financial situation and advise on an appropriate form of debt relief. Solutions like a consumer proposal or even bankruptcy can hugely reduce and even clear your debt for good.
For support with ‘how can I reduce my debt?’, book a free consultation with one of the reputable Licensed Insolvency Trustees at Spergel. We have helped over 100,000 Canadians become debt free, and we can help you too. We will explore a range of debt relief options with you, to help you to make the right decision for your unique financial circumstances. You owe it to yourself.
