Reducing Debt

5 Keys to Reducing Your Overall Debt

Debt is a problem that hits millions of people around the world. It can be overwhelming, stressful and make it difficult to reach your financial goals. However, it doesn’t have to be this way. With the right game plan, it’s possible to reduce overall debt and regain control of your finances. In this article, we’ll explore some of the most effective strategies for reducing debt, and provide some statistics to illustrate their effectiveness.

Click the link to learn more about why people neglect their budgets.

1. Create a budget and stick to it

One of the most important strategies for reducing debt is creating a budget and sticking to it. A budget is simply a plan for how you will spend your money each month. By creating a budget, you can identify areas where you are spending too much money and make adjustments to reduce your overall spending.

CreditDonkey notes that only 32% of Americans have a monthly budget. These people are more likely to pay their bills on time and have less debt. Organization matters folks!

2. Prioritize high-interest debt

If you have multiple debts, it’s important to prioritize paying off the ones with the highest interest rates first. High-interest debt, such as credit card debt, can quickly spiral out of control, making it difficult to reduce your overall debt.

According to CreditCards.com, the average credit card interest rate is 20.77% (as of June 21st, 2023). By tackling high-interest debt, you can save money on interest payments and pay off your debt quicker.

3. Consider debt consolidation

Debt consolidation is the process of combining multiple debts into one loan with a lower interest rate. This can make it easier to manage your debt and reduce your overall monthly payments.

A study by TransUnion shows 58% of people who used debt consolidation saw a reduction in their overall debt. However, it’s important to carefully consider the terms of any debt consolidation loan, and ensure that the interest rate is lower than your current debts. No need to take two steps forward and then fall backward on a sword.

4. Negotiate with creditors

If you’re struggling to make payments on your debts, it’s worth considering negotiating with your creditors. Many creditors are willing to work with borrowers to create a payment plan or reduce interest rates.

Lending Tree reports that 76% of people who asked their credit card company for a lower interest rate were successful. However, it’s important to be prepared for the negotiation process and have a clear understanding of your financial situation. Having a good payment history or a solid credit score are definitely important cards to have in your hand come negotiation time.

5. Increase your income

Finally, one of the most effective strategies for reducing debt is increasing your income. This could involve taking on a second job, asking for a raise at your current job, or starting a side business.

According to a survey by Bankrate, 39% of Americans have a side hustle to earn extra income. By increasing your income, you can make larger payments on your debts and pay them off more quickly.

Also consider finding a new job. 49% of people who jumped ship earned at least 10% more according to a The Conference Board’s survey via ValuePenguin. Remember, it’s typically easier to find a new job while you already have one.

In conclusion, reducing overall debt requires a combination of strategies, including creating a budget, prioritizing high-interest debt, considering debt consolidation, negotiating with creditors, and increasing your income. By implementing these strategies, it’s possible to regain control of your finances and achieve your financial goals. And you know we want to see you win!