Thursday, June 16, 2011

6 Debt Reduction Tips to Keep You in Sound Financial Health

Debt is a curse. The sooner you put in efforts to reduce the level of debts that you owe, the better it is for you. To reduce your debts substantially, the debt relief programs are of paramount importance. This is nothing but partial or total elimination of debt as well as stalling debt growth. Here is a list of some debt reduction strategies that you can follow to curb your debts significantly.

(1) Don't incur debts

In majority of the cases, you fall into debt because of your own imprudent financial behavior. Don't use your credit cards recklessly. Take out loans only to purchase home or car. Try to live within your means. In fact, if you can successfully limit your spending below your income, you will never fall into a debt situation.

(2) Create a realistic budget

It is very important to build up a realistic budget. You categorize your items of expenditures and then allocate money to each category. Make sure that you don’t spend beyond the amount allocated to each category. This will indeed be helpful to keep a lid on your spending behavior. Your budget should be such that you are able to contribute some money to the emergency fund. The emergency fund can be utilized to meet unintended expenses. 

(3) Be well aware of your liabilities

When you have fallen into debts, you have to be well aware of how much you owe to others. You should be well-acquainted with the monthly payments that you have to make, your interest payments as well as the outstanding balances. Don't default in making payments. Only regular payments on your debts can make you debt free.

(4) Close credit card accounts

It is not a wise financial behavior to keep many credit cards. And, if you already have many credit cards, it would be wise to close as many credit card accounts as possible. The underlying rationale to keep less number of credit cards is to curb the temptation to abruptly spend money using cards.

(5) Make more than minimum payments

Make efforts to pay more than your monthly payments. Use the additional amount of money to pay off your lowest outstanding debts. This helps you pay off your lowest outstanding debts even before the scheduled time period. And, once you have successfully paid off your lowest outstanding debts, switch your target to the next lowest outstanding debts. Persist with this process. This helps you clear off your entire debts in a relatively shorter period of time. 

(6) Seek professional help

Sometimes, it is a good ploy to seek professional help to repay your debts. A debt relief company can negotiate a pay off strategy for you after working with your creditors.

These are indeed smart tips that you can start following from today only. Seriously following these tips, will keep you in good financial condition.

This is a guest post by Nancy.


ChampDog said...

You know what, I find out most of my friends have debt problems and majority of them are not from engineering field. But on the other hand, most of my engineer’s friends have no debt problem. Guess why people say marry to an engineer guy is a better choice? lol

One comment I have, I think taking loan to buy car might no be a good idea too. We can buy car but just make sure you buy an affordable car. If possible, buy with cash! Keep in mind that the interest for car loan is 1.9X higher than the mortgage loan!

Also for create a realistic budget and categorize your items of expenditures, hmm… I honestly wonder if this approach is realistic especially for those who already have serious debt problem. I don't think this will work for them.

invest in Best Mutual Fund said...

To get out of debt, your family and you may need to reduce some regular but unnecessary expenses such as dining out and extravagant purchases. Keep yourselves motivated to go on by planning on occasional family treat to celebrate your progress on the road to being debt-free!

ChampDog said...

Rewarding yourself or family seems like a pretty good idea for motivation! But you need to set a reasonable milestone. Once you reach the milestone, you can the celebrate the progress towards debt free! Cool...

tiff bonfiglio said...

thanks for the info
Those tips will help alot of people.
tiff bonfiglio

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