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My Ratings: Self Help Debt Reduction - You Can Do It
If you’re searching for debt reduction solutions, no doubt you’ve been inundated with advertisements for various debt management programs, companies and solutions. The truth is, there are plenty of self help debt reduction options you can use to get your financial situation back under control.
While many of the advertisements you see encourage you to hand over the responsibility for your finances to other people, taking the difficult step of learning to manage your finances yourself can mean that you learn a valuable lesson. Once you’ve grasped the basics on your own, you’ll be in a much stronger financial position in that you’ll be less likely to get back into the same mess again in the future.
Here are some basic self help debt reduction options you can use to get you started on the right track.
Snapshot
It’s important to have an accurate picture of your current financial situation before you embark on a self help debt reduction program. This means understanding exactly how much income is coming in and how much you pay out each month in expenses. Include all forms of income you receive and write this figure down.
Your expenses list should include things like rent or mortgage payments, repayments on any other consumer debts, living expenses, utilities, fuel, groceries, school fees, and any other living expenses you have. Don’t forget to include the little items you buy, like magazines or lunches or coffee. They are still expenses too, so be honest about what you’re spending.
Starting Point
Write down your outstanding balances on all of your current debts. Include any unpaid bills in this amount and add up the totals. The total figure might look a little scary at first, but it’s important you know where you’re starting in order to create a plan of attack.
Alongside each debt balance, write down the amount of interest you’re being charged and how much you’re paying each month on that debt.
Plan of Attack
Self help debt reduction works best when you create a plan specifically designed to work for your unique financial situation. Trying something that worked for a friend won’t necessarily work for you as your situation is not the same as theirs.
Ideally, you should aim at reducing the debts with the highest interest charges on them. These are costing you the most money each month. If you can see anywhere at all in your current list of expenses where you might be able to save a couple of dollars each week, then you should immediately allocate those dollars into your debt reduction plan.
You might want to consider the option of a debt consolidation loan to roll the balances of the high-interest debts into a loan with much lower interest costs. This can help reduce your monthly repayments and give you a little more free cash each month.
Try to keep any smaller balances aside from the consolidation loan. The money you’re saving each month with your lower consolidation loan repayments should be put towards making extra payments on those smaller balances to get them cleared and out of the way quickly.
When these are under control, put that extra cash back into making some extra payments on your consolidation loan to help reduce that balance as quickly as possible.
While self help debt reduction takes time, learning to take responsibility for your own financial situation can be a vital lesson to learn. After all, it took you time to get into debt so be patient while you spend some time getting back out of it again.
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