Here’s a simple debt-reduction plan you can start using today.
If you have debt, paying it off can seem overwhelming. You may not even know where to start. Though debt reduction will likely take some discipline, it can help to have a solid plan in place. Here are steps you can start taking now.
1. Know what you owe.
This is a key first step. Get organized about your debts so you know exactly what you’re facing. Gather statements, check your credit reports and think about any other sources you need to make sure you’re clear on everything you owe.
2. Get a payoff strategy in place.
Having a debt reduction strategy helps you stay focused without getting overwhelmed. There are several different approaches, e.g., paying off your highest-interest debt first or paying off your smallest loans first. Regardless, it’s important to have a strategy that fits your needs.
3. Prioritize the essentials.
Though there may be several different effective debt-reduction strategies for you, one thing you shouldn’t lose sight of is to prioritize the essentials. For example, if you own your home, pay the mortgage and utilities bills first. Reducing your other debts may get a lot more difficult without a roof over your head, running water or having the lights on!
4. Put together a savings/income plan.
Reducing your debt levels will probably require a little extra cash. That’s why any part of a debt-reduction plan will likely include a plan to save a little more, make a little more, or some combination of both.
5. Come to the negotiating table.
The debt you currently owe may not be set in stone. See if you can negotiate with your creditors by paying a little more up-front in exchange for a little relief on the principal amount you owe. Just make sure you get any agreement in writing.
6. Restructure your debt.
This is a really fancy way of describing debt consolidation. For example, you could see if there’s a way you can consolidate your student loans into one with a lower monthly rate. Or you could consolidate revolving credit card debt into a personal loan, which will typically spread your debt into equal monthly payments.
7. Take care of yourself and think positively.
This last one may be the most important of all. If you’re healthy, comfortable and happy, you’re putting yourself in a better position to come up with creative, clear-headed solutions to debt challenges.
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