Debt seems like a normal part of everyday life for most adults. It accumulates easily. There are car loans, mortgage payments, student loans, and credit card balances. In fact, the average American household has over $117,000 in outstanding debt. It’s terrifying, especially if you find that you have that much debt yourself.
I took a little time to look into ways to eliminate our family debt and get us out of the red. The good news is that anyone can do it.
It’s time. Tighten the purse strings and kill debt the right way.
Collect a List of all Debt
Before you can even think about how to get rid of debt, you need to collect a list of everyone you owe money to and how much is owed. It really helps to put things into perspective. Brace yourself though. This can be a discouraging and shocking list, but you need it to move forward.
When you make the list, include the interest rate for each as well. It helps to know not just how much you owe each, but who is charging you the most for interest on your debt.
Create a Realistic Budget
Budgeting is a huge key to eliminating debt. If it’s possible, keep these tips in mind when creating a budget for your family:
- Make a spreadsheet for income and expenses, then another for debt.
- Commit 70% of your combined income to paying debt.
- Put utilities on budget plans to create a regular monthly payment.
- Plan to attack high interest first.
- Become a coupon-clipping queen for necessities.
Keep the Ball Rolling
Knock out the highest interest rate debt first. Once you have one bill paid off, keep at it. It’s called snowballing. When you budget 70% of your income to paying debt, you keep up with that number to pay more on the next debt once the previous is paid off, then more on the next. Soon enough you will find that all you have left is the mortgage. When you reach that point, keep throwing 70% at it until it goes away. You can knock off a lot of interest by paying extra on the principle.
This was hardest for us to accept. We liked our cars, but we owed nearly $30,000 in auto loans alone. Then there was the insurance on both vehicles. Since we had loans out on the cars, we had to have full coverage for insurance. It was hard to accept that we had to get rid of our loans by getting rid of the cars, but we did it. My husband was able to use public transportation to get to and from work, and we used money we made off the cars to buy one vehicle outright. No loans to pay every month, and only liability insurance. The money we were no longer spending on cars, gas, and insurance went straight to debt.
Our kids had needs and we had a lot of debt. Instead of trying to figure out how to deal with the balances ourselves, we sought out the credit repair experts from Lexington Law to help reduce interest rates, balances, and overall debt.
Take a step back from debt and find someone who knows how to best negotiate debt and improve your overall credit score. It’s hard to admit that you need help, but there are companies with years of experience dealing with debt and they can help you too.
There are a number of ways to creatively reduce monthly spending. Some of them are hard to swallow; some of them are obvious. Give yourself more money for your debts by following these tips to reduce monthly spending:
- Rent movies from the library instead of paying for them.
- Get rid of cable or satellite. You don’t need it as much as you need the money, and you can watch almost anything online cheap or free.
- Get rid of land lines if you have cell phones. You don’t need it.
- Get rid of smartphones. They are expensive. Get a cheap pre-paid phone until your debt is gone.
- Sell stuff. We accumulate a lot of unnecessary stuff over the years. Some of it’s worth money.
- Eliminate non-essential expenses such as manicures, magazines, etc (wants vs needs).
- Buy in bulk and freeze. Bulk goods are cheaper in the long run (and it means fewer trips to the store).
- Shop second-hand. If the kids need new clothes, shop at Goodwill or Salvation Army instead of buying brand new. Find out when the next discount day is and stop in then (but go early).
There are a number of ways to cut corners and kill debt, but you have to be dedicated to the task and willing to make sacrifices. The more sacrifices you make, the faster the debt will be paid.
This featured post was brought to you by Jane.