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Perhaps the most significant change you can make to increase your quality of life is to reduce your debt. Of course this doesn’t apply strictly to individuals, even companies and large corporations can benefit from hunkering down in a recessionary environment such as what we’re experiencing today. If you’re feeling overwhelmed, now is a good time to take action. Getting your bills under control will reduce stress and lead to a happier home, or office. Follow these easy 5 steps for reducing debt:

Start With A Plan

You should take a moment to sit down and write out a plan. Much like a business plan, write down where you want to be and begin to organize the steps needed to get there. This includes listing all of your debts, your income, and what you can and cannot cut out. Fixed expenses; things like mortgage or rent payments, long term loans like a car, your electric bill etc. there’s not a lot that can be done right away aside from working out an early repayment plan. You also have semi-fixed, or variable expenses. These would include things that you can adjust or cut out easier; things like shopping trips, restaurants, vacations and going to the movies. Sort these by priority and understand that you’re going to have to cut something if you want to cut your debt.

Develop A Budget

Much part of the planning process, developing a budget is the key to success. By using tools such as your credit reports and billing statements, build a list of all your debts and how much you owe each creditor. Call them and try to negotiate payment plans you can afford. If you can, explain your situation and try to work out a modified payment plan – one that hopefully lowers your payments to a more manageable level. Prioritize your debt to pay off the higher interest loans first. If you have additional money after paying bills, putting that money towards the higher interest credit cards and loans will save you the most money in the long run, and lead to paying off your debt sooner.

Curb The Impulse Buying

We’re all guilty of it, however the fastest and most effective way to getting your debt under control is to reduce your spending. Many people spend hundreds of dollars on a whim, without putting much thought into what they’re buying. Whether you think you’re an impulse buyer or now, write down everything you spend for a month and I’m sure you’ll be surprised as to where your money goes. Starbucks anyone?

Use Cash Or Debit Instead Of Credit

One of the leading causes of excessive debt is overuse of a credit card. Many people fail to realize how much money they’re actually spending on credit cards. Unfortunately for some, this may exceed the money they’re actually making. Next thing you know, you owe a thousands of dollars to credit card companies buying things you really didn’t need to have. Try to limit your credit card spending to emergencies, or those times of the month that you absolutely have to so that you can get get by. As soon as you get your next paycheck, try to pay that money off in full.

Get Help From A Credit Counselor

If all else fails, and you’ve done everything you can to curb your own spending and make a budget, seek help from a professional. With the help of a credit counselor, you’ll be given advice and help making a plan that will get you out of debt. There’s no shame in asking for help, and many provide this service in a non-profit manner.

One Response to “Reduce Debt In 5 Easy Steps”

  1. The best advice I can give is – go spend all your money. To help stimulate the economy. Dont worry about being broke. I am sure you will be O.K. tomarrow.

    Posted by: Mike West on on March 4th, 2009 at 3:45 pm.