Debt has a major impact on your financial well-being. The more money you owe toward unpaid loans or credit card bills, the likelier you are to pay more in interest over time.
The amount of debt you have can also affect your personal life. For example, the more money you owe to credit card companies and other lenders, the less likely you are to be able to afford luxury items such as new electronics or vacations every summer.
Since debt can have a negative impact on every aspect of your life, it’s important that you minimize the amount you owe as soon as possible.
Fortunately, there are many different ways you can reduce and manage your debt. The 10 best strategies you can use to minimize the amount you owe are outlined below.
Tip 1. Figure out why you went into debt.
Before you can successfully get out of debt, you need to know what got you in this position in the first place. To help you understand your financial situation better, be sure to ask yourself the following questions:
- Where do I overspend?
- Do I follow a budget?
- How often do I buy items using credit?
- Am I making the minimum required payment on my loans?
After answering these questions, you should have a better idea as to why you are in debt. Then, you can come up with effective strategies to help you save more and spend less over time.
Tip 2. Come up with a new budget.
Once you determine why you went into debt, you’ll probably need to adjust your spending habits.
To do this, you should create a budget. This way, you know exactly how much you can spend each month and still make progress toward paying off your bills.
When you make a new budget, there are some things you’ll need to take into account. For example, make sure you know:
- How much income you can expect to earn each month.
- The amount you need to pay on your loans so you can get out of debt.
- Your general monthly expenses, such as your rent, utility bills and how much you spend on groceries.
Tip 3. Consolidate your credit card debt.
If you have credit card debt that’s spread over various cards, you may be able to obtain relief by consolidating your debt. This process isn’t for everyone, but it can be very helpful for people who have a plan for how they’re going to pay off their credit card bills.
When you consolidate your debt, you take all of the credit card bills you have and transfer the balances you owe to a new card that has a lower monthly interest amount. You’re still responsible for paying the amounts you owe, but they’re funnelled into one payment.
Since credit cards usually come with high annual percentage rates (APRs), borrowers end up paying extra money in interest. However, when you transfer your balance to a low-interest card, you can avoid these extra fees.
However, keep in mind that credit cards with low APRs usually only offer these benefits for a limited period of time. They usually only span the first year or 18 months you have the card. This means you need to pay off your balance before the end of the promotional period or you’ll be in the same situation as before.
Tip 4. Arrange payment plans with the companies you owe money to.
Beyond overspending on credit cards, some people find themselves in debt because they don’t pay their utility or medical bills on time. Any unpaid bills you have contributed to your overall debt, and they should be eliminated as soon as possible.
If you have a high amount of money you owe to a hospital, for example, you should contact the institution and see if you can arrange a payment plan. This is an especially effective option if you can’t pay off your balance at one time.
By contacting the company you owe, you’re proving that you’re taking steps to eliminate your debt. This looks much better than dodging phone calls and ignoring letters from companies you owe money to.
Tip 5. Cut back on your monthly expenses.
Another way you can help get yourself out of debt is by reducing your monthly expenses. This way, you can save more money each month without needing to adjust your income.
Each week, you’re probably spending more than you realize. Some easy ways you can reduce your expenses include:
- Buying fewer coffees.
- Eating out less.
- Eliminating any streaming services you don’t need.
- Spending less at the grocery store.
Tip 6. Get a part-time job.
If you’ve reduced your spending as much as you can and still need some extra money, it might be time to get a part-time job. Having an extra source of income can make it much easier to increase your savings and pay off your debt quicker.
Depending on your situation, you might be able to find freelance work related to writing or photography. However, if you aren’t qualified for one of these jobs, there are industries that are usually hiring part-time workers. The following industries usually have opportunities for part-time work:
- Food service
Tip 7. Go beyond your minimum monthly payment.
If you’re looking to make big strides in paying off your credit card debt, you’ll need to make more than the minimum required payment each month.
For every month you keep a balance on your credit card, you’ll probably be required to pay interest on whatever amount you still owe. The less you pay each month, the longer it will take for you to pay off your balance. This means you’ll spend more over time.
In order to reduce the overall amount you need to pay in interest fees, you’ll want to pay more than the minimum required payment each month. This will also help you pay off your debt more quickly.
Tip 8. Eliminate unnecessary shopping trips.
When you’re paying off debt, it’s important that any extra money you have go toward your bills. This means you shouldn’t take unnecessary trips to the mall or go on shopping sprees until you’re out of debt.
You’ll definitely need to buy some things while you’re paying off your debt, but it’s important that you do so in moderation. This means you should:
- Plan ahead so you know what you need to buy before you go to the store.
- Budget for whatever items you must purchase.
- Make sure you’re only buying necessary items.
Tip 9. Have a garage sale.
Every dollar you save can go towards your overall debt. If you’ve already trimmed your budget and need some extra cash, it might be time to have a garage sale.
You’ve probably got some items at home you don’t use or don’t need. Instead of throwing them away, you can sell them to make some extra money.
If you have any of the following, you can probably sell it at your garage sale:
Tip 10. Consult with a financial advisor.
If you’re not sure how to start managing your debt, you might want to speak with a financial advisor. Trained professionals can help you make the best decisions so you can restructure your finances.
You can easily find quality financial advisors online. You can also speak to friends and family members to see if they can recommend anyone to you.