Debt Reduction in Six Steps

Get on the Road to Debt Recovery Today

Those serious about reducing debt and enjoying life will find these six easy steps helpful. It isn’t automatically true that being in debt is a bad condition, though some people think that it is. If debt is correctly handled, much more income is free to be invested, saved or is able to be enjoyed for other activities. A common condition is the mismanagement of debt, which then leads to wasting money on things like hefty interest rates and late fees.

Good credit ratings are only offered to individuals demonstrating an ability to responsibly handle debt. People like this tend to spend less on their debt because they don’t pay late fees and they receive lower interest rates. Monies that are saved can be spent on things like quality education, investments or recreational activities. It takes an important first step in order to begin navigating the road to recovering from debt.

1. Attitude adjustment

The first step in debt reduction is to change one’s attitude toward money and how it is used. Bad debt happens when people either make the mistake of failing to balance their figures or they fail to distinguish between needs and wants. Loneliness, low self-esteem, insecurity and other emotional problems are sometimes compensated for in the spending of money on unnecessary items. In debt reduction strategies, one must take a serious look at how they view money and adjust any poor mental attitudes they may have about it. Poor attitudes about money and debt need to be understood before reduction is possible; in much the same way that an overweight person has to understand their poor eating habits before correcting them in an effort to lose weight.

2. Lifestyle changes

The second step in debt reduction is to make lifestyle changes. Reducing debt is most easily accomplished when the amount of cash being spent is reduced. Since poor spending habits have been recognized, immediate steps to live more modestly have to be taken. Lavish spending must be stopped, of course. Also, expenditures one wouldn’t ordinarily consider to be luxurious or lavish can be eliminated, too.

For instance, the monthly output on bills can be significantly reduced if home appliances are completely unplugged rather than merely powered off. Monthly bills can also be lowered by making home cooked meals, abandoning luxuries like cable television or even letting a home telephone go for a while.

3. Negotiate

The third step is to negotiate payment on all past due balances. Ignoring a debt will not make it disappear. It destroys credit and deepens the amount of debt, in fact. Therefore, debt recovery strategies should include contacting all creditors to arrange payment on past due debts. If at all possible, monthly payments should be consolidated so that monthly payments are manageable. Make each and every payment on a timely schedule after negotiating.

4. Generate more income

The fourth step is to create additional streams of income. Debt reduction using a single income source is difficult. Multiple income streams means paying off debts faster. Having more than a single income option, means that if a stream slows down or completely dries, a person can still successfully meet their debt obligations with the other streams.

5. Perfect timing

The fifth step is to pay all existing debts on time. It’s better to pay all debts in a timely fashion, even on the smallest of debts and even if only the minimum can be paid. Failure to pay debt leads to an increase in fees and damages credit. This, unfortunately, makes it very difficult to obtain future credit and it results in having to pay higher interest rates on credit that’s given.

6. Spread the word

The sixth step is to make others aware of your emphasis on debt reduction. The goal is, of course, to attract accountability in spending. Though one person can’t control how another spends their income, people are far more likely to stick to their goals and plans when they know that they are under scrutiny to do so. Encouragement from others can be helpful, particularly if a person feels as though they are about to stray from their debt reduction strategies.

Overall, the most important thing is to admit the need for debt reduction right away and then set about regulating spending habits. In doing so, credit isn’t the only thing that’s protected, but goals of traveling, financing a new business or early retirement are also easier to attain. With these easy six steps to debt reduction, dreams are more quickly realized while, at the same time, debt stress is eliminated.