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How to reduce your debt without losing your mind

Analaura Luna

If you want to reduce – or even eliminate – your credit card debt without losing your mind in the process, read on! This article will show you how to create an effective budget, generate extra income to pay down your debt faster and finally, a sure-fire debt reduction strategy that actually works!

Monitor your spending

We’ve said it before, but there really is no substitute for knowing where your money is going. Tracking down every cent you spend can actually decrease your spending by as much as ten to 15 per cent (according to budgeting website Mvelopes) and this alone can be a great way to start digging yourself out of the debt quicksand.

Earn more

If you’re going to get that debt down fast you’re going to need to find a way to earn more cash to funnel into your debt repayments. There really are loads of ways to achieve this – you can ask for overtime at work, start a home-based business outside of work hours, pick up a second job or even have a hunt around the house to see if there are any little gems you could put on Ebay. Whatever it takes to increase that debt repayment, do it. If you really can’t generate any more income then you need to take a chainsaw to your expenses and ruthlessly cut the ones you can live without. It might seem harsh, but remember, you got yourself into this position, so you’re going to have to sacrifice a little to get yourself out of it.

Focus your efforts

Finally, the best way to pay your debts off in record time is to take a focused approach – concentrate on the debt with the highest interest rate and work like mad to pay it off as fast as you can, while making the minimum payments on the rest of your debts. Once the first debt is gone, move onto the debt with the next highest interest rate and do the same thing again.

This is the complete opposite to the approach most people take to pay off their debt. Most people simply keep paying the minimum each month and continue the slow crawl to being debt-free one three per cent minimum payment at a time and wonder why they never seem to get anywhere. Using a focused approach and paying as much as you can each month will chew into that debt faster than you ever thought possible and all it takes is a little discipline and dedication.

Make it happen

Everybody wants to be debt free, but very few people are willing to put in the hard yards to get there. By developing the discipline to track every dollar that you spend, generating extra funds that you can use in addition to your normal income to accelerate your debt reduction efforts, and focusing on the debt with the highest interest rate first, you'll be reducing the principal of your debts, not merely making a dent in the interest each month. Then all that remains is to generate an effective money management strategy to ensure that you never end up in this situation again!

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Author's Biography

Analaura Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.