How to reduce debt - Debt reduction strategies Good housekeeping amongst other things is all about keeping a roof over our family's heads. However, sometimes this can be easier said than done. At some point in our lives we all carry some amount of debt, whether it be paying off the mortgage, repaying loans or paying school fees. Generally - although we may find some difficulty along the way – we’re able to pay these off without too much discomfort. But there are some occasions when we overstretch ourselves and get into serious difficulties. Below are some excellent debt reduction strategies to help you in your hour of need. How to reduce debt, the first step One of the first things to do when or if you are heading into despair is to calm yourself down, don’t bury your head in the sand, hoping it will all go away because it won’t, it will just snowball and grow into a giant monster. Once you have done this you need to sit down and sort out a budget more details on budgets can be found here: A budget is a superb way of helping you enhance your understanding of the way in which your debts are being made. When this realization kicks in you’ll be in a better position to think of strategies to control them, so check out the links and see what you think. Save money To avoid getting into these difficulties in the first place start putting some money away whenever you can to cater for any eventuality. However, don’t put money away which may eat into any interest repayments, use the budget process (Family budget tips) to work out how much you can afford to put away without getting into any more difficulties. Reduce the number of bank accounts you hold Try to limit the number of bank accounts in which you have money going into. When we have more than one account we can have major difficulties in keeping track of our cash. If we can control the inflow of money it will be easier to control the outflow in terms of paying off debts and bills. Additionally if you have fewer accounts then you’ll spend less time and effort having to juggle your money around in order to fulfill your commitments. You may also find it less costly if you reduce the number of accounts you have as some bank accounts have fees attached to them which you are needlessly paying. A general rule is to have two types of accounts, a savings account and a checking account. This is a good tip on how to reduce debt, thus reducing your debts. Reduce the amount of creditors to whom you owe money Reduce the amount of creditors you have and don’t take on credit or loans when you don’t have to. The more creditors you have the greater amount of money you’ll have to pay back as interest, not to mention the daunting task of making sure these individual payments get to the relevant creditors on time. A good method in how to reduce debt is to cut down on the amount of credit cards you have, if you have three, why not reduce it to one. The same can be done for your debts in general; debt consolidation is the way forward here. There are many companies out there which have this facility, so give them a call and get the best deal for you. Seek professional advice If things really are getting on top of you a good debt management tip is to go and seek free professional debt management advice. The Citizen Advice Bureau will be able to point you in the right direction, so why not give them a call and make an appointment; you’ve got nothing to lose? Contact creditors If you don’t want to go down the above route you can always contact your creditors, to see if you can gain more favourable credit terms, after all they’ll rather get little bits back rather than nothing at all. Prioritise your payments When thinking of strategies of how to reduce debt you should seriously think about prioritising your debts. Here you’ll pay off the debts which have the greatest penalty fixed against them such as your mortgage or loans which are secured against your property. Secondly, pay off debts which have the highest interest rates against them, you’ll need to do this, as these debts will spiral out of control a lot faster than those with a lower interest rate against them. Online banking is the future Most banks have superb websites where you can sign-up to their online banking service using your existing bank account. Just go online with your bank details at hand and follow the step-by-step instructions. Once you have signed up to online banking you can conveniently check your financial situation 24-7. Through this service you can pay bills and transfer money at a touch of button, leaving you with no excuse not to pay those bills on time. Freeze your assets? If you are really struggling keeping away from your credit cards this debt management tip may do the trick, you can literally freeze your assets. All you need is a large container, a plastic bag, water and a fridge freezer. What you have to do is place your credit cards into a plastic bag, tying it tightly. Put the plastic bag into the container and fill it up with water (it doesn’t matter if some water gets into the bag as it won’t ruin the cards). The final step is to say goodbye to your credit cards and put them into the freezer. It is very important to note, not to put the frozen credit cards in the microwave to thaw them out as this will ruin them. The whole point of freezing your credit cards is it will stop you from spontaneously charging items to them. Log phone calls and letters This method in how to reduce debt is an important consideration to take into account. It is very important to note that any phone calls you make and every letter you write and receive regarding your debt management must be recorded or kept hold of. In terms of phone calls make sure you get the names of any person you speak to, so any conversation you have about your credit can be traced back to the original source. Thanks for checking out our OPH Good Housekeeping Debt management tips
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