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.Â 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.Â 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.Â I know we get fascinated by interest rates – and rightly so – but the quickest way to eliminate debt is to reduce principal.Â I like to make my regular payment, early in the payment cycle, and then make an extra payment (or two) throughout the month.Â I have checked with my creditors to ensure that I understand how they handle extra payments.
Tip 5 –
Get one month ahead.Â This is a new one for me.Â In the past, all I had to deal with was consumer debt.Â Now, I have a mortgage.Â My payment is due on the first of each month.Â Instead of scheduling my June 1st payment to be deducted from my checking account on June 1st, I schedule it for May 1st.Â In effect, I’ve not only made my payment early, I’ve also given myself a (nearly) two-month cushion.Â I have until July 1st to both make the July 1st payment AND make extra payments towards principal.Â Now, I will not wait until July 1st to make my next full payment, but I have the cushion, built in, just in case.
2 thoughts on “5 Simple Debt Reduction Tips”
I think one more solid point should be added as “expend lesser on shopping every week”…Spending more than required on festival season over the “shopping” has always been an important issue for the families, specially the women and children…if possible, try to make a fair budget for the same… 🙂
You are right that being dedicated to reducing debt is essential to being successful at tackling it in the long term. I also agree that timely payment is essential. I try and automate as much as possible, so that I don’t forget to pay debts
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