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.