To Reduce Debt You Must Have a Plan
To reduce debt you must have a plan.
In simplistic terms, debt reduction occurs when you earn more money and spend less. The trick is to know how to accomplish that task. The first step to reducing your debt is to make a balance sheet. You must know what your monthly income is and where your money is going.
It is easier to list your income, so start there. Now that you know how much money you have available each month, tackle the hard part of finding out where it is going.
List first EVERY payment that you pay out on a monthly basis, like house payment/rent, car payment, phone bill, internet fees, cable TV bills, credit card payments, utilities/(water, gas and electric), newspaper delivery, etc.
Next list payments that are yearly like car and house insurance, vehicle registration, taxes, etc. Divide these by 12 and set aside that amount monthly to prepare for the payment when it comes due.
Now you are ready to find out how much your other expenses add up to. Where is your money going? Can you cut out some of these expenditures?
Keep a log of every single expenditure. With NO EXCEPTIONS, Write down everything. Keep a log of every single purchase you make. Write down what you bought and how much it cost. If you left a tip, write that down too. Be diligent about keeping your log book, and if you do it well, you can just do it for a month and gather enough information to help you save even without the log book.
Most people find hidden expenses, like $10 per day for coffee or $50 per month for a gym membership that is never used, and then they can easily adjust their budget to save money immediately.
Are you spending too much on food? Tip, don’t go grocery shopping when you are hungry. You will buy things that you really don’t NEED. Eat out less. You will save money eating at home more often.
Did you overspend on Christmas gifts, (or any other kinds of gifts)? Be creative and give gifts you have made, or give gifts of your time.
Rent DVD’s instead of going to the movies.
Make a commitment to yourself that you will not spend money that you do not have, even if you have to go without something that you want. If you follow through with that commitment, it may even motivate you to finding ways of earning extra income.
Paying off your debts is liberating. It will reduce your stress and increase your self confidence. IT IS WORTH THE EFFORT AND THE TIME SPENT MAKING YOUR PLAN OF ATTACK AND IMPLEMENTING YOUR NECESSARY CHANGES.
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