It’s been said that the simple solution to debt reduction is to increase income and decrease expenses. Most of those struggling with burdensome debt have made serious attempts to do both. However, job loss, medical expenses or emergencies force many to rely on credit cards. Ultimately, this short-term solution becomes a permanent problem. Determine the best solutions to debt reduction for you.
1. Use Cash Instead of Credit
Taking cash out of your wallet instead of whipping out a card makes many reconsider the purchase and helps prevent impulse buying.
2. Create a Workable Budget.
You can’t deal with any problem effectively without having the facts. List all expenses and determine where cuts can be made. Some find the envelope system helpful. Put cash into envelopes labeled Rent, Food, Phone, etc. and don’t spend it for anything else. Put a little aside each month to build up a cushion for unexpected expenses (easier said than done).
3. Prioritize Debt.
List all debts and the interest rate for each. Sort them, with the highest rate debts at the top. Make minimum payments on all except the debt with the highest interest rate and pay extra on that one. Another way to prioritize debt is from smaller to larger, paying off the debt with the lowest balance first.
This is difficult to do and may not work in practice. Making minimum payments might not cover the monthly interest charges, allowing the debt to actually increase.
4. Don’t Blow the Budget When Creditors Call
The debt collector on the other end of the line spends all of his working life collecting debts and knows how to do it. It will be very tempting to get him or her off the phone by making a payment. With limited funds available, this money will come out of the rent payment, the light bill, or another credit card payment. In the end, this is only a postponement of a solution.
5. Learn About the Legal Options for Debt Reduction
Determine the best solutions to debt reduction by investigating all options. Chapter 7 or Chapter 13 bankruptcy may offer the best long-term solution.
Those struggling with debt in the Atlanta, GA, area can contact Chris Carouthers & Associates for a free consultation. They will explain the available options and how to get started on eliminating most debt. Get out of debt and enjoy life once again.
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