Five Strategies for Medium Level Debt

5 debt reduction tips

5 debt reduction tips

Many people have debt levels that are medium level – that is, not just a few small credit card debts and not a massive debt burden, but some where in between. At about the $30’000-$50’000 mark the debt is transitioning from a small problem into a huge one. Action needs to be taken before the debt explodes and reaches a level that will take you decades to recover from.

Here are five simple techniques to help reduce medium level debt burdens quickly and precisely!

Set small, achievable and precise goals

Sometimes when the debt is at this level it can feel like you are paying it off but getting nowhere. So split the debts up into smaller chunks so as you reduce the debt level you feel a sense of achievement and can gain momentum.

So write down your smaller and more achievable goals and incorporate them into the debt repayment plan. You could choose a credit card and make paying it off and cutting it up part of your debt repayment plan. If the card only has $3000 on it, you can pay it off quickly, then move onto the other debts.

When you pay it off, celebrate! Make a big deal out of it, so take your wife out to dinner and have a nice bottle of wine, then cut the card up together. Use the sense of achievement to gain debt repayment momentum and push on to the other debts. This is positive feedback in action.

Attack the small stuff first

A lot of the debt that builds up is from simple spending habits that can be changed very easily. If you are finding that money simply “disappears” from your wallet, slow down and take a look at exactly where it goes. In the average day, how many times do you open your wallet and what are you buying.

Coffee, expensive lunches, expensive dinners, parking, travel costs, the morning newspaper, all often daily expenses that we don’t think about or consider part of our lifestyle. Take the time to think about these daily and habitual expense and see if there are opportunities to reduce expenses. The extra money can be used to pay back debt.

Examine monthly bills

There are actually a lot of opportunities for saving money in the regular bills that most people receive. You can often find a better phone or electricity provider who will give you a better rate. Sometimes the sales people will negotiate a better rate with you, to get you to sign up with their company. By reducing these bills you can eliminate a lot of money that “leaks” out of your life. You work hard to earn money, don’t let it leak to expensive utility providers when there is an opportunity to save money.

Also examine your monthly entertainment bills. A lot of people have high levels of debt, but are still spending on frivolous entertainment items. Do you have any monthly subscriptions which you could live without? That extra $50 a month could save you a lot in the long run if you use it to pay down debt.

You can also free up a lot of time and improve your lifestyle by looking at exactly how you are spending your time. By ditching the cable TV, suddenly you will have the time to go to the public library and start reading books again.

Automate and simplify where you can

In this age of the Internet, there are actually a number of ways we can simplify our finances. Look at ways you can service your debt without much thought, and regulate your cash flow so you don’t overspend. There are many websites to help you budget and you can talk to your bank abour splitting your income into multiple accounts or having money for bills put aside immediately when your pay check is deposited.

Be intelligent, be proactive and use the technologies on offer to make your life simpler. With some planning you won’t even have to think about regular payments and debt management. As long as you get it right at the planning stage you can have a stress free life, knowing exactly how much money you have on hand to spend on entertainment and lifestyle.

Spend money when it makes sense

Even though you are trying to reduce expenses, look for spending opportunities that can save you money. One area would be in the kitchen where having a well equipped kitchen could save you money on expensive restaurants.

How much coffee do you buy from coffee shops? Would it make economic sense to buy a high quality coffee machine and stop buying your cup of joe from the local coffee shop every morning. Over the space of a year, the savings could be substantial. So sit down and do the sums – will a purchase save you money.

Be honest about the calculation, is it an item you know you will frequently use and one that will save you money in the long term? You can even use credit to purchase the item as many shops offer 24 months interest free deals. So buy that expensive coffee machine on credit for $400 if it means you will be saving $500 every year on your morning cup of coffee. Do the sums properly though, and include running costs of the item (in this case coffee beans, coffee machine cleaning tools, electricity).

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