Debt is one of the biggest troubles facing most American families these days. Families are struggling to make car payments and high monthly mortgages, and many are taking on even more debt by sending their kids to college. In fact, the debt crisis has become so severe that the Federal Reserve’s July report noted that the total U.S. revolving debt was a staggering $793.1 billion, 98 percent of which belonged to credit cards with the average American household having nearly $16,000 in credit card debt.
This high level of debt can cause extreme anxiety, and has made many decide to choose reducing their debt as their New Year’s Resolution. So if you are one of millions that has chosen to reduce their debt in their upcoming year, consider adhering to the following tips:
Create a Budget
One of the things that leads people to overspend is the lack of foresight in regards to their monthly budget. People don’t always take into consideration just how much they spend monthly compared to how much they bring in. To make an adequate monthly budget, be real with yourself. Write down exactly how much you make and take into account on how much you spend on everything from your mortgage to your entertainment, and then see where you can feasibly reduce your expenses.
Cut Up the Cards
Credit cards are the most likely cause of debt, next to school loans and mortgages with many people actually paying more to their credit card companies than they do on their car payment. If you find yourself frequently reaching for your credit cards when you can’t afford an unnecessary purchase, cut them up. Go head and get rid of those cards so that you can pay them off without racking up more debt.
If you do choose to keep a credit card or two in your wallet, make sure that you choose the best rebate credit cards so that you are able to benefit the most from what you charge each month. Most credit cards with great rebates offer reviews online, and the Chase Sapphire Preferred review and the Discover review are a few of the more popular. However, if you use these cards, make sure that you can pay off the balance at the end of every month.
Analyze Your Debt Resources
When it comes to starting afresh and wiping the slate clean, as far as that is concerned it can seem like a major struggle trying to chip away, especially if you have many credit cards. But when you are in debt, finding approaches to reduce your debt, or at the very least, consolidate it into one payment method can help you too to reduce it quickly. It’s usually the last refuge of someone struggling with debt but filing for bankruptcy could be a way to wipe the slate clean. While there are many issues associated with bankruptcy, you could go for a different approach such as a consumer proposal, where you can wipe your debt but still keep some of your assets. But if you don’t know what your options are where you are based, taking the time to research can arm you with the best approaches for your individual needs.
Make Your Morning Coffee and Bring Your Lunch
Hundreds of dollars are wasted every year on fancy coffees and eating out – even opting for a regular cup of coffee daily instead of your normal drink can total up to a staggering $80 a month, and that’s the minimum.
To save yourself some money, money which would be better spent paying off debt, make your morning coffee at home and bring your lunch to work. Sure, eating in the office isn’t always as fun as escaping the office for a brief period, but it can save you $200 or more a month – a cutback well worth it if you are serious about getting out of debt.
Choosing to get out of debt isn’t as easy as simply paying a few extra dollars to your creditors each month. Choosing to get out of debt is a lifestyle change. In addition to paying extra each month, you will need to change your life so that you can live more frugally which means avoiding the coffee shops, shopping sprees, and unnecessary trips.
*This is a guest post by Becky W.
I hate debt! Now if we cant afford it we just dont buy it, it works out pretty well
Wondeful tips! All I need now is will power! 🙂
I think that the biggest thing that we all face is the feeling that we work hard and deserve the extra $5 skinny latte from our favorite coffee shop.
I don’t typically shop during most months unless there is a need, but my grocery bill is a beast that must be tamed. I buy as much organic and premium produce as a I can. I don’t mind buying a much smaller $9 piece of exotic cheese from a small farm in Vermont because I hate the path that we are on: 100% processed and refined junk food as our primary source of calories. Buying the expensive stuff means that I have to know ‘exactly’ how much my family will eat while still enjoying the food and when not to buy because food will spoil.
In short I have reduced what we throw away due to waste so that I can afford to buy better.
My logic is that if I throw away half of a portion of food which I bought at half price really I could have bought a smaller amount of something much better.
I think we all need less then we think!
Great article.
These are all wonderful tips for taming our debt. My husband and I have managed to eliminate a significant portion of our debt last and have only a small amount remaining that we are working on the first of this year. Thanks for the post and information!
Those are some great tips. I’m so glad we really don’t have much debt besides our home and one car.
Yeah, great tips!!!
I disagree with a few assertions in this article. Firstly, debt is not necessarily bad. Secondly, credit cards are not a cause of debt. Thirdly, “fancy” coffees don’t always cost more than “regular” coffee and they are not a “waste.” Debt is actually a good thing, its paying excessive interest on debts that is a bad thing. Huge difference. The only cause of debt is a person spending beyond his or her means. Credit cards have the ability to easily facilitate that behavior, but they are not a cause of debt and are a very very good and useful thing to have and use for lots of reasons. I buy cappuccinos a few times per week and they cost the exact same as a regular coffee here, $1.39. On days that I don’t want a sweet coffee drink, I brew my own and that costs me around $.08 per pot. Sure you can save money brewing at home, but the time investment can easily add up to more than the $1.31 saved – if I’m late to work by 5 minutes because I stopped to brew a pot of coffee in the morning, I lose more than $1.31 worth of favor with my boss… Good try on the article, but its mostly hyperbole and misinformation.
Our New Years Resolution this year was to keep a budget. We have been doing very well on it. The biggest surprise was all of the little impulse purchases we made add up to big bucks!
Great tips! We are really trying to stay within our budget for 2012. It takes a lot of effort but we know it will be well worth it at the end!
Following a budget is hard but needed.