Whether a lot or a little, debt is a part of every person’s life. The question is what do you do about it? How can you employ smart debt reduction strategies so that you can live the life you want while carrying only debt you can handle? Here are some debt reduction strategies which may come in handy for reducing your debts:
Analyze your expenses: The first thing you need to do to realize a life free from debt is sit down and honestly look at how much money you are bringing in and how much you are really spending each month. If you have $10,000 or $20,000 in credit card debts but you’re barely able to pay the rent, there’s a problem. It’s time to figure out ways to make more money, cut back on your expenses, and focus on your debt so that getting rid of it all becomes your primary goal.
Interest: Another essential part of your debt reduction strategies is to figure out what kind of interest rates you are paying on your debt. You may be surprised to see that your interest may be outstripping your minimum monthly payments! If you have a maxed out $5,000 credit card and your minimum payment is only $100 but your interest rate is 29% — obviously paying only the minimum payment is not going to get the job done. Do yourself a favor and shop around to see if you can find a better deal.
Deals: Many times credit cards will offer special deals for new customers. Be wary of these “introductory offers” but look into them. Often times you can use the intro 0% interest rate for 6 months on balance transfers, or whatever options they are offering, and that can be a real lifeline. Just don’t fall back into the same old traps of maxing out the credit line; use only what you can afford to pay back and don’t forget about your monthly payments!
Overdraft: A quick word about overdraft protection from your bank. These deals may come in some of the same glittery packaging that credit card offers do, but the thing about overdraft is that you probably shouldn’t have it. If you are overextending your chequing account balances, you probably should cut up your debit cards and only use cash. Overdraft is a big burden that many of us use so thoughtlessly. If we don’t pay it off in a timely fashion, it winds up costing us much more than its worth.
If you have tried some of these debt reduction strategies but still have that cloud of debt hanging over your head, you may need some professional help. Credit Counselling Services of Atlantic Canada can help you by taking a look at your debts and create a plan that will help you realize your dreams of financial freedom.