How can I cut down debt?
Some people get into debt and carry it with them everywhere they go. They think, Why not pay with cash? Why not pay at a store? Why not pay online? Why not
Most of us have wishes and wants that are bigger than our paycheques. You might have heard the old saying, “You can have almost anything you want; you just can’t afford everything you want.” Many people get into debt and carry it with them everywhere they go. They think, Why not pay with cash? Why not pay at a store? Why not pay online?”
Say you have $10,000 of debt at a high interest rate. You could easily pay off $3,000 of debt in two years if you only made the minimum payment. Instead, how about you made the minimum payment but took a small cut? You could have saved even more money by using the money to pay down your credit card debt.
Would that be a bad idea? Consider how these types of cuts will impact your daily life. Will your friends and family be upset if you cut the cord and stay put? Will they be happy if you simply cancel all your subscriptions and re-do the cycle? How about if you “blackmail”
Can you afford not to watch TV? If not, then consider how these types of cuts will affect your budget.
How can I cut down debt?
Many people come up with the same “debt snowball” or “avalanche” strategy: one step at a time. Don’t do any of that and don’t get discouraged if you’re nowhere close to where you’re supposed to be. It’s part of the game.
As you pay down your debt, you’ll want to make sure that you’re not leaving any unsecured financial commitments behind. If there’s a down payment needed for a down payment on a house, it’s in there.
If you’re not making enough progress with your debts, one way to at least start getting ahead of them is to evaluate your lifestyle more broadly. Are you continuing to travel frequently? Does traveling require a ticket? Does traveling allow you flexibility in paying off debt? Does traveling also allow you room to experiment?
If you’re living in a townhouse or townhouseapartment, you’d probably be spending more time there than in your car or light truck. If you’re commuting to work, take transit or a car pool for a ride-along. If you’re staying in a townhouse, it’s probably costing you more than you could handle at home.
If you’re in such a bind that you can’t afford the things you’re supposed to be using those dollars, one way to at least start getting ahead of those debts is to question your priorities.
How can I cut down debt?
The answer is usually not an overnight fix, but rather, one that you can take with you when you get out of debt. Here are a few ideas to get you started:
Not all types of debt are created equal. For example, personal loans with an average balance-to-limit ratio of 3:1 are not created equal. For this reason, it is best to avoid lending to anyone with an average or above-average balance-to-limit ratio. If you do decide to lend, do a balance-transfer if you have to, as it can save you a ton of money. Regardless of the type of debt you decide to transfer, make sure you’re making enough progress toward paying it off that you can afford to make a balance transfer.
Personal loans can also put a damper on your budget. If you’re not making enough progress toward paying off your debt that you’d rather save for a future debt, then prioritizing a debt in your budget will likely be counterproductive. If you have a debt-repayment strategy that you’re struggling with, then making sure that you’re spending at least 10% of your income on debt repayment will go a long way toward helping.
It is impossible to predict the weather, so it is impossible to predict how quickly your debt payments will come. If you aren’t making enough progress toward paying them off that you’d rather save for a debt, then prioritizing those debts in your budget will likely be counterproductive. If you’re making progress in making a plan, but need a break from the numbers, then a 4% pay cut can go a long way.
How can I cut down debt? Simple – if I’m not making a lot of money, I’d prefer not to have one. If I’d rather have a little savings than a lot of money, I’d rather have a low-interest card rather than a credit card.
There are a lot of great articles out there that teach you how to reduce your debt, or at least how to do it in a systematic fashion. For example, Zero to One by David Henderson is an excellent read if you want to learn how to get out of debt completely.
Another great article is entitled “How to Get Out of Debt” which can be found on The Simple Way to Zero by Steven Matzke. In it, Steven shows you exactly how to do it on your own, step-by-step.
As I write this, over the past two years, I’ve paid off $9,000.00 worth of credit cards and insurance policies. I’ve also saved more than $3,000.00 in interest. Now that I’ve eliminated debt, I’d much rather have a higher-interest card than a debt-repayment strategy that involves cutting back.
In 2000, MIT researchers took two groups of students and dangled scarce Boston Celtic tickets in front of them. One group was required to pay cash; the other was asked to pay by credit card.
How can I cut down debt? There are so many ways to cut down, and it’s impossible for us to cover every option in every situation. To help, we’ll be including budgeting tips and strategies that will help you trim down or eliminate these top 10 debts.
. Scissors are great for small tasks, but are they the best tool for making big changes? Yes, but if you’re not prepared and don’t have time to make new friends, there’s a good possibility of going into debt.
. Scissors are great for cutting through clutter, but are they the best way to pay off a large debt like a personal loan? No, but it’s something you’ll have to consider if you’re serious about paying off that debt.
. If you have four credit cards and an overdraft on one, one card can cost you as much as $300 in interest within a year. If you’re not serious about paying off your debt, you’ll have to make a plan and stick to it. If you’re not following the plan, one card can end up costing you thousands.
. If you have a mortgage, and your monthly income after taxes is $11,200, it’s nearly impossible to see how you can pay off your debt in four years. In fact, it’s almost impossible for most people to achieve. If you’re in such a bind that you can’t see the light at the end of the tunnel, one way to at least start getting ahead of that debt is to pay less interest if possible.
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