Get Serious About Reducing Debt

Filed under: Personal Finance, Young Adults, Adults, Retirees

As they say, the way to eat an elephant is one bite at a time. Likewise, the way to get out of debt is one bill at a time. If your debts are causing you some concern, here's a plan to help you. Take your smallest debt - if you have two about the same size choose the one with the highest interest rate - and pay whatever extra you can on that bill until it is paid off. Then, take the monthly payment from the paid off bill plus all the extra money you can spare and pay it on the next smallest bill until that one is paid off, too. Then continue on to the next bill.

If any of these bills you pay off is a credit card, you would be wise to call and officially close the paid off account and cut up the card. This plan may take some time and discipline but getting out of debt usually does. You'll be improving your credit score which also takes time but is worth it. A higher credit score will qualify you for lower loan rates on car loans and mortgages.

Are you having trouble envisioning where any extra money to pay on bills would come from? Fix dinner at home instead of eating out. Take your lunch instead of going out. Rent a movie instead of going to one. Save on gas money by planning your trips. Throw your loose change in a bowl and pay that on the bill each month. Think before you spend. $5 or $10 blown here and there can really add up in a month's time. Oh yeah, and leave those credit cards at home. If you don't have them with you then you can't use them.

Need some accountability? Tell someone that you think is a good money manager what your plan is and agree to give them progress reports. You'll have someone to keep you on track and to celebrate your victories with you. They may also have some suggestions of ways you can economize.

Once you get your debts under control you can start building a cushion of savings. Then you will be able to use your savings for unexpected expenses instead of your credit card. Stop by our lobby and pick up a copy of "Your Budget Blueprint" for more information and useful tips.

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