The following is a guest post.
Life gets in the way some times with unexpected expenses or a job loss, and often the result is the family budget being compromised. When these situations arise, and bills outpace income, it’s easy to incur a lot of personal debt. Even as income increases, and spending decreases, it can be difficult to get caught up and reduce household debt. Here are 4 ways you can pay down your personal debt and keep it under control.
Surf Credit Card Offers
Used properly, this can be a great way to pay down your credit card debt. Credit card companies want your business, especially if you pay your bills on time. In an effort to attract customers, many companies offer low introductory rates, often well far below the maximum annual percentage rate (APR) allowed by law. Typically, these rates last between 6 and 12 months, before jumping up significantly, often to the allowable state maximum. Over the years, savvy consumers have taken advantage of these offers and transferred balances off of one card onto a competing one with a lower interest rate. The most effective way to employ this tactic is to transfer that balance and then pay as much as you can on it each month. Remember, you’re still paying interest, just not as much. Also, credit card companies have tried to scare people into thinking that their credit score will be affected by doing this. Hokum. Recent activity accounts for only 10% of your score.[1] However, if you surf too many times it will become apparent in your credit report, and you may simply be denied credit at some point, leaving you high and dry with a high APR. The key: pay it down and don’t charge anymore.
Find a better deal
Not only can you find a better deal on credit cards, you can also get better terms on your mortgage, phone service, cable TV service, and more. Start with the bank that’s carrying your mortgage. Find out if the current rate is lower than the rate you are paying now. Call other banks and lending institutions and see if they can offer a better deal. Call your phone service provider and see what special offers might be available, or what features you can eliminate and consider dropping your land-line. More and more people doing it, and it can save you upwards of $50.00 each month. Also, cut the cable. High-definition (HD) TV is available for free over the air. If you’re favorite shows are on a cable network, consider a cheaper alternative like Netflix, Hulu, or Amazon. You can also borrow DVDs from the library.
Get Another Job
An extra part-time job, even one that brings in just a few hundred dollars a month can make a sizeable dent in your debt.[2] Many part-time jobs are flexible, so you can work hours that are convenient to your schedule. For greater flexibility, find odd jobs in your neighborhood. Cut grass, clean out gutters, or paint a deck. If you’re time is already at a premium, try selling things you don’t need any more. It’s a great way to de-clutter and raise extra cash. Anything you can do to increase your income will help you decrease debt. Most importantly, if you’re working and making money, you’re not spending money.
Draw up a budget
And stick to it. It’s very easy. Take your income and divide it into spending categories. Include a column for debt reduction.[3] If you’ve never drawn up a budget, it might take a month or two to get some of the figures settled. Concurrent to putting your budget together, or in advance of doing so, keep track of everything you spend money on. This will give you a great idea of how much you’re spending on necessities like food, fuel, and utilities. It can also give you an idea of what frivolous purchase you’re making and where you can cut down on discretionary items like entertainment, clothes, and transportation. Cutting up your credit cards is helpful, especially if your debt is high. Often though, people want to keep one in case of an emergency. If you plan on doing that, stick it in the freezer, or someplace else that will make it difficult for you to gain easy access.
References:
[1]Barrett, Jennifer. “Credit Scores: What You Need to Know.” The New York Times. Web. 24 April 2013 http://topics.nytimes.com/your-money/credit/credit-scores/index.html
[2] “Five Steps to Reduce Your Credit Card Debt.” KMOV.com. Web. 22 May 2013 http://www.kmov.com/news/slideshows/Five-ways-to-reduce-credit-card-debt-126651883.html?gallery=y#/news/slideshows/Five-ways-to-reduce-credit-card-debt-126651883.html?gallery=y&img=3&c=y&c=y
[3] Barr, Tracy “How to Create a Monthly Budget.” Dummies.com. 22 May 2013. http://www.dummies.com/how-to/content/how-to-create-a-monthly-budget.html