Debt sucks. If you have revolving credit that you’re not paying off every month, you are throwing your money away. Well, you’re not really throwing it away so much as you’re giving it to banks and credit card companies – essentially paying for someone else’s life of luxury! I want to help you take control of your finances and start funding your own life of luxury!
 
Check out the top 10 ways to decrease your debt, when you’re done reading take action on at least 3. The key to making this work is to only bite off what you can chew. Once you’ve put those 3 things into action, then come back and start working on another two or three.
 
Let me know what’s working for you – share your tips for reducing debt in the comments!
 
 

1. BE CONSISTENT

 
Consistency is your number one friend when you’re trying to get out of debt. As simple as it sounds, you really have to make every single one of your payments on time every month. Set up automatic payments to pay at least the minimum amount due. If you’re making late payments or missing them your debt will continue to grow. That’s not what you want! Make it a habit to make at least the minimum payment- on time – for every account you have.
 
 

2. CHECK YOUR CREDIT SCORE

 
Yeah, this one can be depressing, but avoiding it won’t make your credit score any higher! You can use a service like Credit Karma to keep on top of your credit score – they will notify you of any changes to your credit score for free, and suggest ways to increase your credit score. Increasing your credit score can save you tons of money on future purchases such as cars or mortgages; the higher your credit score, the lower your annual percentage rate for these loans will be (not to mention it will be a lot easier to get these loans in the first place!).
 
 

3. CREATE A BUDGET

 
Don’t just create a budget – creating a budget is easy (I use Mint.com  The hard part is the follow through. Things always come up – friends invite you out to dinner, it’s your boyfriend’s birthday (you’ve got to spoil him, right?!), your car needs new tires, etc. All of these things may seem like one time purchases that are difficult to account for, so they fail to be accounted for in your budget. Add them to your budget – figure out how much you typically spend on these items over a year and put that money aside – for new tires you might not need them for a few years… If new tires cost you $500 and you have to buy them every 5 years, then you should be putting aside roughly $8.50 every month. Imagine how good it will feel next time you have to buy tires and it’s not a burden – the money is already sitting there waiting to be spent on tires!
 
 

4. STOP USING YOUR CREDIT CARDS

 
I know, I know… seems harsh, maybe even impossible. Put them in a drawer, cut ’em up if you have to. Just do not carry them around in your wallet or purse “just in case.” Commit yourself to living within your means. If, for some reason, you do happen to use your credit card, make sure you pay for that entire purchase this month. Don’t pay finance charges for things you can afford (and don’t go buying things you can’t afford!).
 
 

5. PAY OFF YOUR SMALLEST DEBT FIRST

 
This is called the snowball debt reduction method. There are other methods, and good reasons to use them (for instance, paying off your highest interest rate debt first makes sense and will save you more money in the long run), but there’s something to be said for building momentum. Find out how much you can realistically put towards paying off your smallest balance loan and dedicate yourself to smashing that debt.
 
Paying that first balance off will give you a much deserved sense of accomplishment and will show you that you have control over your finances. Once that smallest debt has been paid off, put ALL of the money you were paying towards that debt into the monthly payment for your next smallest debt. You’re already used to not having that money each month – stay disciplined. Adding payments from the previous debt is where you start to build your snowball. Keep at it and this snowball will be your ticket to living debt free!
 
 

6. PAY MORE THAN THE MINIMUM BALANCE

 
Always pay more than the minimum balance. It’s easy to get caught up in revolving credit that you haven’t used in years, but doesn’t seem to be going down. Paying the minimum amount is good enough if you want to have that debt forever and all you’re interested in is staying out of trouble with your credit card company. I’m guessing that’s not all you want. You want out from under that debt. Do something about it. Even if it’s only an extra $5 or $10 a month – pay more than the minimum!
 
If you’re following the snowball debt reduction method, pay the minimum on all accounts except your smallest balance. You’ll be paying more than the minimum on the next smallest debt after you’re first debt has been paid.
 
 

7. INCREASE YOUR INCOME

 
Doesn’t matter how you do it (there are many ways) but figure out some way you can earn an extra hundred dollars a month – or an extra $500 a month… sounds crazy right? It’s not. Check out this post for the top 5 ways to increase your income.  Take that extra income and put it towards paying down your debt.
 
A good rule of thumb for any increase in earnings is to take at least 50% of it and put that towards paying debt or increasing savings. This way you’re letting yourself have a little bit of the reward for your increased income now, and you’re taking care of your future self by paying down debt or increasing your savings/retirement.
 
 

8. CUT YOUR EXPENSES

 
Be ruthless – you’ve already created your budget, so you know exactly where your money goes each month. Now take that information and figure out 3 bills you can either reduce or eliminate. I’m not saying don’t go out to eat, or don’t go to the movies. I’m saying use Groupon or Restaurant.com to be able to do these things for about half the cost.
 
Check out your cell phone bill. That one’s a big one for me. There was a time when I was paying well over $200/month for two lines on Verizon. Look into using Metro PCS or Cricket Wireless  – if your current bill is anything like mine was you can easily cut that bill in half!
 
 

9. SELL SOMETHING

 
I know your garage is full of crap you haven’t used in the last 5 years. That bike with the rusty chain in the corner? Dust it off, clean the chain and put it on Craigslist – even if you only get $50 from it, throw that $50 directly at your smallest debt and you’ll be that much closer to paying it off. Who knows, you might find you’ve got a few thousand dollars worth of valuable things to sell – I recently sold an old mountain bike and a guitar I wasn’t playing and came away with a couple thousand dollars. This was stuff I’d been holding on to because I didn’t want to let it go, but to be honest, I hadn’t used either of them much at all over the last few years – and I had other bikes and other guitars!
 
 

10. BUILD YOUR EMERGENCY SAVINGS

 
Think about what got you into debt in the first place… either you were just being careless and overspending your way into debt, or something big came up that you had to put on your credit card – your car broke down, you had to have a root canal, the new iPhone came out (that’s a joke, don’t use your emergency savings to buy an iPhone!). Aim for saving enough to cover all of your living expenses for 3 – 6 months. I know it sounds like a lot, but once you’re done paying all of your debts – take ALL of the money you had been spending on monthly payments and pay yourself. Your savings will add up in no time.
 
Once you’ve gotten yourself out of debt and you have your emergency savings built up it’s time to start putting money away for retirement. Take the money you had been paying yourself every month and put that money into your 401K or IRA. Maximize these – your tax bill and your future self will both thank you for it!
 
I’d love to hear from you, what are some of your best tips/tricks for getting out of debt?

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