3 Steps Towards Debt Reduction
The average American has 15 bills to pay each month. These include car loans, utilities, cell phones, and a couple of credit cards. Many people, however, have dozens of bills that they have to pay every month. This is especially true in the case of people who have gone through a major life event such as a graduation, marriage, or divorce, and now have bills have multiple sources to contend with. Multiple loans and lines of credit can produce so many bills that it can be hard to keep track of them all even if you have the money to pay them. In many cases, that means you’re forgetting to pay something which leads to fees, increased interest charges, and a poor credit score. Fortunately, there are ways to work on debt reduction of bills you receive each month.
1. Make a list of everything you have to pay.
Just writing down what bills you have, the day they’re due, the interest rate, minimum payment, and total amount owed can go a long way towards making sure that everything gets paid. Post this list somewhere where you can see it when it’s time to pay bills. This helps you focus on your debt reduction goals.
2. Pay off your small debts.
If you owe small amounts on a lot of different cards, pay them off first. Even if these cards have low interest rates, you’ll reduce the clutter and stress in your life (and avoid late fees) by prioritizing this debt over other bills. Each small debt you pay off gets rid of a monthly bill and reduces the total amount of debt that you owe. As you pay off each card, take it out of your wallet and file it away so you’re not tempted to run up charges again. Then, cross that bill off the list you made in Step 1. This is a very effective debt reduction method.
3. Consider debt consolidation.
This is a great option if you owe moderate or large amounts on several different cards. A debt counselor will work with you to figure out your best debt solution. In many cases, they can negotiate with credit card companies to reduce your interest rates and/or stretch out your payments, making it possible for you to pay less every month. The best part is that you’ll only have one bill to pay instead of the dozens you currently have.