5 Simple Debt Reduction Tips

I like to write about an array of personal finance topics, but my true passion is debt reduction.

Tip 1

Send in credit card payments as soon as is possible.  This reduces your average daily balance and total interest charges.

Tip 2 –

Be both analytical and emotional. Debt reduction requires three things – money, a solid plan, and firm dedication.  Create a plan to reduce your debt – and then get a little angry.

Tip 3 –

Stop adding to total debt. Reducing one credit card balance by $500, only to charge $600 on another card doesn’t make sense.

Tip 4

Focus on reducing principal.  I know we get fascinated by interest rates – and rightly so – but the quickest way to eliminate debt is to reduce principal.  I like to make my regular payment, early in the payment cycle, and then make an extra payment (or two) throughout the month.  I have checked with my creditors to ensure that I understand how they handle extra payments.

Tip 5 –

Get one month ahead.  This is a new one for me.  In the past, all I had to deal with was consumer debt.  Now, I have a mortgage.  My payment is due on the first of each month.  Instead of scheduling my June 1st payment to be deducted from my checking account on June 1st, I schedule it for May 1st.  In effect, I’ve not only made my payment early, I’ve also given myself a (nearly) two-month cushion.  I have until July 1st to both make the July 1st payment AND make extra payments towards principal.  Now, I will not wait until July 1st to make my next full payment, but I have the cushion, built in, just in case.