Debt problems are causing misery for more people than ever before, and personal debt levels are at their highest in history. Many of us want to get started on paying down our debts, but the task can seem overwhelming. There are, however three effective techniques you can use to get started on the path to a debt free future,
First off, it's vital to take a look at your spending and reign it in whenever possible. There's little point in trying to pay down debts with one hand while the other is busy running up new borrowing. Resolve to stop using your credit cards except as an easy payment method, always paying back what you've spent when your statement arrives. Also look at economising on your daily spending - buying cheaper brands, forgoing the occasional treat or social event, it all adds up.
But this alone will do little to clear your debt - you need a plan to pay it off as soon as possible, and this is where the idea of 'snowballing' comes in. Basically, you focus your attention on paying down one debt as soon as possible, putting all your spare cash into this effort while maintaining your other debts at their minimum repayment levels. Once this first debt has been cleared, add the monthly repayments you'd been making on it to the payments on the next debt in the queue. This way, the effectiveness of your money gets greater and greater as it transfers from one debt to the next.
If you're having serious trouble keeping up with your repayments, however, the previous two techniques aren't going to stave off disaster. It's here that debt consolidation might be a useful option. The basic idea is to take out a new source of credit, and use it to pay off all your existing debts. The idea is that servicing your new single loan will be cheaper than the combined fees, interest and charges of your previous debts, and so more of your money will go towards reducing the amount you owe rather than just treading water paying the interest.
You really need to take care with this last option though, as you're potentially adding to your debt problems rather than easing them. Be sure you have the discipline to clear your old debts and not run them up again before going down this route.
None of these options are easy, and none are without their drawbacks and dangers. However, most of us accept now that debt levels are too high and we need to start doing something to reduce them, whatever the short term pain that might be involved. By taking these suggestions and putting them into action, you can make that first step towards becoming debt free.
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