Here in the U.S. we have a staggering $945.9 billion in outstanding credit card debt, according to the Federal Reserve. If you consider the most recent population numbers in the U.S., this debt averages out to around $4,000 worth of credit card debt per person.
While some people carry far more debt than others, just about everyone could stand to focus more on about debt reduction.
Today we’re sharing four simple debt reduction steps to consider this year. Could 2018 be the year you seriously reduce your debt? Keep on reading!
1. Know Where You Stand
It’s time to collect each of your financial documents and grab your free annual credit reports. This can be a great way to jumpstart your debt reduction plans this year. It can feel a little intimidating and it’s common to drag your feet on this step, but once you’ve done it you’ll have a much clearer picture of your current financial situation.
Next, write down the balance, interest rate, and monthly amount due for each one of your debts. This should include everything from personal loans, car loans, credit cards (don’t forget to take note of those annual fees) and much more.
For this step in your debt reduction strategy, it won’t be necessary to include items like your mortgage loan or student loans. These types of loans tend to have relatively long terms and low APRs, so you’re better off focusing your debt reduction efforts on your other debts at first.
2. Look At Your Monthly Budget
Start by noting your monthly after-tax income. Then subtract your monthly expenses from this amount: rent/mortgage payment and other monthly expenses like insurance, childcare, student loan payments, utilities, and groceries.
At this point you’ll want to calculate how much you have left each month to pay off your debts. Does this amount seem a smaller than you’d hoped it would be? Not to worry, there are plenty of ways to move toward debt reduction…
3. Make A Debt Reduction Plan & Stick To It
Here are some everyday ideas:
- Hold a garage sale. Advertise your higher-ticket items on websites like Craigslist or Facebook, or place an ad in your local newspaper.
- Re-shop or renegotiate your car, life, and home insurance to bring down your regular payments.
- Consider picking up a seasonal position or other part-time employment.
- Cut the cord – it’s easier than you think to get rid of cable or at least purchase a more affordable package.
- Disconnect your telephone landline if possible.
- Have clothing you no longer want? You can always buy and sell your clothing at a local consignment shop.
- Keep an eye out for sales and switch to generic brands when you’re grocery shopping. Make use of any rewards programs to help you earn gas points. And don’t forget to buy your most expensive groceries in bulk!
- Audit your subscriptions with debt reduction in mind and make cuts where possible. It might be time to let that magazine subscription, seldom-used gym membership, newspapers, manicures, and more fall by the wayside for a while.
- Stick to matinee movies or watch simply them at home – and skip the concession stands.
- Borrow books from your library instead of purchasing new copies.
- Establish a spending limit with your family at Christmas or start a secret Santa-style gift giving tradition.
- Brew your coffee at home instead of purchasing it each day.
- Pack your lunch regularly. Make extra dinner servings and bring the leftovers with you for lunch the next day.
- Keep your debt reduction plans in mind as you program your thermostat for savings on heating/cooling – especially when you’re not at home.
4. Tax Return? Use It To Pay Down Debt
Just when it seems like you’re doing all you can to save and take steps toward debt reduction – some extra money can come your way! When the occasional windfall comes along, whether it’s a work bonus, a tax return or something else entirely, promise yourself you’ll turn your bonus money into bonus debt repayments.
Before you know it, debt reduction will have simply become part of your lifestyle – and you’ll be close to a debt-free life than you ever thought possible.
*Disclaimer: Citywide Home Loans does not provide tax services, financial planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.