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Reduce Your Debts

Written by: Clare Evans

Article Overview: According to research by Callcredit (May 2005), 60% of consumers do not know how much they owe. 10% of men have no idea about their personal debts while women are worse, with 20% not knowing their personal debts. Debts can be a major cause of stress and anxiety. You may have got into debt through no fault of your own but the sooner you realise you have a problem you can start doing something about it.

Reduce Your Debts

According to research by Callcredit (May 2005), 60% of consumers do not know how much they owe. 10% of men have no idea about their personal debts while women are worse, with 20% not knowing their personal debts.

Where do you fit in to these statistics?

Debts can be a major cause of stress and anxiety. You might feel like sticking your head in the sand, not open the bills and just keep paying the minimum monthly payments on your credit card.

Long-term debt can have a serious impact on your health – physically and emotionally as well as your relationships. You may have got into debt through no fault of your own but the sooner you realise you have a problem you can start doing something about it.

Credit cards are just another form of debt. It may seem like an easy solution, ‘Buy Now, Pay Later’ but how much do you really end up paying for that short-term pleasure?

Before you start reducing your debts, get all your debts out on the table. How many debts do you currently have?

- Loans, outstanding credit cards etc.
- What interest are you paying on them and over how long?
- How many payments are outstanding?
- How much will you end up paying in total?

No more just paying the minimum payment each month. You’re just hiding from how much you’re actually spending and what it’s actually costing you.

Before you are tempted to go to one of these debt consolidation companies, see what you can do for yourself first. They may lower your payments but you could end up paying more in the longer term and some of them charge a hefty upfront fee for their services, which they just add on to your debt.

If you have a high level of debt – talk to the credit card company or banks to see if you can renegotiate your debt and the payments. Look into the interest free transfers on credit cards but be aware these can be over the short-term only and don’t allow new debt to be accumulated – if you do, they’ll hit you will high interest rates.

Once you’ve identified your debts, you can start busting them one by one. Choose the first debt you want to clear. Use any spare cash you have to put toward the most expensive debt, while keeping up the minimum payments on all the others.

While it may make sense to pay off the highest interest or largest debt first, sometimes you may get a lot more personal satisfaction and be more motivated to pay off a more emotional debt first (for instance the loan for a car you no longer own).

Avoid accumulating any further debt, while you’re clearing your current debt.

DON’T reduce your payments. DON’T be tempted to spend that ‘spare’ money on yourself. You MUST clear your debts first.

Cut up your credit cards. If you can’t spend responsibly then don’t use them. It’s a good idea to put your credit card payments on direct debit so the FULL amount gets paid each month.

Use cash for everything. You’ll soon realise how much you’re spending if you have to pay for everything with cash.

Never buy what you can’t afford. There are rarely things that you need so desperately that you absolutely must buy them NOW. If you want something – save up for it and buy it when you can afford it.

Here are just a few ideas to earn some extra income to provide you will additional cash to get you out of debt faster.

1. Get a second job to clear your debts that much quicker. Even working a couple of extra hours a week or a part-time job will help.

2. Take any unwanted goods, clothes and clutter to a car boot sale. You can make some extra money and add that to your debt reduction pot.

3. Pay for everything with notes – don’t pay for anything with change. Put the change to one side every time you get home and it will soon mount up to some real debt-busting money. (Try it this week). Save the change and put it towards paying off those debts each month.

Once you’ve cleared any debt you can move on to starting making some savings.

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