11 Easy Steps to Pay Down Debt

10 08 2011

Featured in the Military Saves August 2011 Newsletter

How much do I owe?  Average households carry some $10,700 in credit card debt, according to CNN Money.  The burden of carrying debt not only adds strain to a household but also to an already tough economic U.S. situation.

However, there is hope in sight.  American families can grab the reigns of their finances and shrink their debt burden.  It may not be easy but the payoff will be huge!  Being debt-free provides financial happiness and security to many.

Here are some ways to pay down debt:

  • Stick to the Plan.  A sure way to help eliminate debt is by sticking to your plan of becoming debt-free.  Everyone falls off track but the important part is to get back on track.  If you find yourself wandering away from your goals, realize you cannot get ahead if effort isn’t made.  The famous comedian Will Rogers once said “Even if you’re on the right track, you’ll get run over if you just sit there”.  Stick to the plan.
  • Refuse to Charge More.  While planning to pay off debt, it is essential that a person does not take on new debt.  When new debt is added to the scenario, your credit situation magnifies.  It becomes increasingly harder to pay old and new bills, especially if paying only the required minimum payments each month.
  • Use Cash.  Utilizing cash is a powerful tool.  Cash and/or debit cards have been proven to help lower spending.  Think of it – when you use a credit card you are somewhat separated from your money.  All it takes is a quick swipe to complete a purchase transaction.  Now, imagine purchasing that same item with cash.  You take the cash out of your wallet and realize you only have five $20 bills.  You tend to double think the purchase because once cash leaves your wallet it’s gone.  Using cash to purchase items curbs spending.
  • Use Extra Cash to get Ahead.  Was it your birthday?  Did you receive cash as a gift?  Good for you!  Send that cash gift to your lenders.  Any extra cash received is a sure way to speed up the repayment process while pushing you ahead of schedule of being debt free.
  • Postpone Vacations and Gifts.  The trade off of eliminating gift giving and vacations is being debt-free!  An easy way to ditch debt is by postponing these items for a later point in time.  Imagine taking your first vacation debt free!  Think about how you will enjoy your time more because bills won’t be waiting for you upon your return home.
  • Shop only when Necessary.  That mall trip you take each Sunday – consider it canceled.  “Every-day” spending habits need to change.  Shopping only when necessary will free up cash during the month that can be used for debt repayment.  Plan ahead and stick to shopping lists.  Ask yourself if the purchase can be postponed for a later time.
  • Lower Expenses.  Lowering monthly expenses are a great way to realize a surplus each month.  Perhaps you can switch to a basic cable television plan or lower cellphone minutes.  Some may choose expenses altogether (i.e. cancel newspaper delivery or dining out).
  • Realize it’s Temporary.  Realizing your current financial position is temporary provides the motivation needed to attack debt.  Reducing expenses, especially recreational activities, are only temporary until the debt has been paid off.  Once debt-free, it may surprise you to see that you’re keeping those canceled expenses after realizing how much money you have saved per month!
  • Negotiate Lower Interest Rates.  If you are finding it hard to pay the required minimum payment every month, negotiate with lenders to lower interest rates.  Red, White, Blue Tip – With regard to the military community, Servicemembers whom acquired debt prior to entering military service may be eligible for an interest rate reduction with the Servicemembers’ Civil Relief Act (SCRA).  The Act provides a maximum 6% interest rate on loans which were acquired prior to entering the Armed Forces.  (Refer to the SCRA: http://www.saveandinvest.org/Military/DeploymentandPCS/ServicemembersCivilReliefAct/)
  • Find a Part-Time Job.  A sure way to maximize your payments to lenders is with an increased cash flow.  And where does one find more cash?  With a part-time job!  Maybe you are great at math, tutor children during the week.  Or a stay at home mom, how about babysitting neighborhood children?  Whatever the job may be, it’s providing that extra source of income needed in an attempt to accelerate the debt repayment process.
  • Work with a Budget.  Using a budget allows individuals to see where their money is going.  Budgets track income and expenses.  The idea is to have a surplus of money at month’s end – that surplus will be used to repay monthly debt payments.

Paying off debt is possible!  Begin with the end in sight.




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