Things you should do to reduce personal debt

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By: Joy Mali
on 11th Nov,2013

A financial crisis is something that thousands of people face on a daily basis. Even when your finances seem overwhelming, there may be a way out.
Things you should do to reduce personal debt


A financial crisis is something that thousands of people face on a daily basis. Even when your finances seem overwhelming, there may be a way out. There are a variety of reasons that financial issues can arise, whether you lost your job, have a serious illness or simply got carried away with spending, the end result is the same. The answer for everyone is to find the way of reducing personal debt that works for them.

Sit Down and Make a Plan


The first step, before making any drastic changes, is to make a debt management plan. This not only means determining what expenses you have, but balancing those expenses with your current income to determine how you are going to tackle the debt. Most debt cannot be paid off overnight; it likely took quite a bit of time to get in over your head and it will take just as much time, if not more, to get out of debt. When creating your plan, consider the following factors:

All income sources, including child support, alimony, or any other sources.

Monthly expenses that do not change, such as the mortgage, phone bill, utility bills, and insurance.

Variable expenses including entertainment, groceries, and grooming.

All outstanding debts including overdue credit cards, collections, and liens.

Track your Expenses for a Month


Chances are you do not know all of your expenses. You might have a general idea, but it isn’t until you track every penny you spend that you have a true picture of how much you truly spend. When you start tracking, you need to include every penny that leaves your wallet or gets charged on your debit or credit card, even if it is only one or two dollars. This will make it much easier to determine how much you spend on a monthly basis and where your changes need to occur in order to start reducing personal debt.

Set your Goals


Once you have a full picture of your financial status, it is time to set your goals. Start by choosing one debt to pay off at a time. Typically it is recommended to start with the debt that charges the highest interest rate. This will allow you to cut out unnecessary charges the fastest. As you pay this debt down, don’t forget to continue making the minimum payments on the remainder of your credit cards or debts. You will get to pay those debts off soon, too, but it is important to stay on time with your payments. If you are unsure of all of your debts, getting your credit report is one way that allows you to see all of your outstanding debts in one place. If you don’t know what a debt is, or what the interest rate is, contact the creditor before making any decisions about which debt to start paying off first.

Talk to your Creditors


If after creating your written plan, you realize that you do not have enough money to start paying off your debts, talk to your creditors. They want to hear from you and do not want you to ignore the debt. If you are upfront with each creditor, you might be able to ask for a modified plan to get your debts paid off. Some creditors may even offer a plan to you, when you make the phone call. They’d rather help you pay your debt, than send it off to a collection agency.

Don’t Forget Savings


As a part of your debt management plan, it is important to follow tips to create personal savings because every dollar that you can save counts. Even if you can only find room to save ten dollars right now, it is a start to a small nest egg for the future, whether you are saving to create an emergency fund or pay for a vacation, a house, or a car. Your personal savings could prevent you suffering from financial issues in the future.


A financial crisis can be scary, but with a solid plan, there is a way out. Reducing personal debt and creating a savings account is an important step for everyone to take in order to secure their financial future. You are never too old to start a savings account or to create a plan to get yourself out of debt. Remember, every little bit counts.

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