What Are the Best Ways to Reduce Your Debt in 2013?

by Samantha Bennet on 2013/01/29

Debt is something that many people have started to experience more and more since the banking collapse of 2008 as no one anticipated the fall out that would occur from the crisis.

Prior to 2008, many were enjoying a honeymoon period where banks were easily giving high loan amounts with low interest rates. Since 2008, this has changed and many have started to find it difficult to pay back the huge amounts borrowed.

If you find this similar to your situation, then this year could be the year where you finally sort out your finances, so why not find ways to reduce your debt in 2013.

To help you find ways to reduce your debt in 2013 we have compiled three important tips that could really help you on your way to being debt free.

    Plan Your Bills

    One of the big reasons many fall into debt is because they do not manage their finances well. We all watch the money in our account, but how many of us actually plan our bills in advance to understand the income and outgoings?

    Make a spreadsheet, or simply write down all your bills so you know what your expenditures are. Now write your monthly income down and subtract one from the other. The figure left is what you have for yourself, do not spend over this amount so you can stay on budget and not cause any further debt.

    Create a Plan

    Now you have planned for your bills, why not create a plan on paying off your debt sooner. Whilst you are paying the minimum monthly amount on your debt you are actually paying more over time by gaining more interest on the debt you owe. (See our credit card payment calculator here to figure out how long it will take you to get out of debt.)

    A great way to do this is to look at the additional amount you can afford to pay from the amount you have left after paying your bills in your plan. You can then apportion a specific amount of this to paying more off your debt. The best way to do this is pay off the debt with the highest interest rate first to maximise your finances.

    Consolidate Your Debt

    One of the big issues with debt is the many creditors you have to pay; sometimes it can be hard to keep up with all the different payments leaving your bank account. One of the great ways of managing and reducing debt is to actually take out more finance to pay off all the outstanding debt and consolidate it into one loan.

    There are two reasons for doing this. The first is to only have one payment leaving your account making planning your bills and managing your finances easier. The second is to potentially find a more preferential interest rate reducing your outgoings whilst having the same debt amount. With some credit card issuers you can get 12 to 18 month interest free credit cards which are great for this.

Summary

Debt is something many people are burdened by and it can cause stress to the individual as well as the people around them. If you are truly in the mindset of finding ways to reduce your debt in 2013, then the three ways mentioned above will really support achieving financial health in 2013.

Next- Read More Ways to Reduce Debt here

What are the Top Credit Cards in 2013?

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