Anyone that has a high level of debt to pay on each month will know how stressful financial management can be. For those people that are crippling themselves with extremely high debt levels, there are some actionable steps that could help reduce the amount that you pay out each month. These steps might also help you reduce the overall amount of interest paid on your debts as well.
1. See where you can make little cutbacks on your spending. Look at cutting back on little luxuries that add up quickly, such as eating out at lunch each day. Also cut out any unnecessary expenditures, such as subscriptions and memberships that you no longer use. It is surprising how much money you can gain back through a number of small steps. This newfound money can then be applied towards your smaller debts such as credit cards and store cards in an attempt to pay them down quickly.
2. Make sure that you are aware of exactly what is coming in and what is going out of your checking account each month. Trying to manage your finances and prioritize paying off debt is nearly impossible if you don't keep track of your income and expenses. List every little payment that goes out of your account so you know exactly how much you can afford to spend each month or how much extra you can put towards clearing your debts a little faster.
3. Consider consolidating your debts (see our article here). By consolidating smaller debts into one large loan you can reduce the number of payments you have to make each month, cut back on the interest amount, and possibly even reduce the amount that you pay out each month on debt. For homeowners specifically, a secured loan could be the ideal solution, as this amount of money can be spread over a longer time period and help keep your monthly repayment amount lower. You should be fully aware though, that by taking money and repaying it over a longer period of time, that this would mean you pay back interest for a lot longer. However, if the interest rate is drastically less than what you currently pay, and the lower monthly payment means that you have more disposable income to spend each month, then a new loan might serve you well. Remember to stop using your credit cards after you have paid them off! (See our article here on budgeting.)
4. Eliminate your overdraft. If you have an overdraft account with your bank, and you find yourself reaching that limit every month, one small transaction is all it takes to push you over the limit. By eliminating your overdraft account and building up an emergency fund, you get to keep all of your money each month.
5. If you ABSOLUTELY HAVE to take out another loan in order to fix your financial situation, make sure it is a consolidation loan rather than an addition to your existing finances. It may sound obvious, but try to avoid taking out a loan as an easy solution. In most cases, this will only ease the burden for a short time and you may soon find yourself struggling even more than before trying to keep up with all of your previous debts plus a new loan.