This year I’ve really gotten serious about implementing debt reduction strategies and getting completely out of debt. So, I’ve been examining debt reduction plans of some of the top, most well known Christian financial advisors. From what I have read they all have a few tips in common.
First, each advisor recommends establishing an emergency fund of at least one thousand dollars. Having this emergency fund will keep you from resorting to using credit when an emergency arises. Some ways to build this fund quickly are to:
- Sell some things that you no longer need or want;
- Find one thing you spend money on each day and cut back on that spending or eliminate it altogether. One example would be to take your lunch to work instead of eating out. Take the money you would normally spend on lunch and add it to your emergency fund.
- Switch your cash value life insurance to term life insurance. Move the cash that you get back into the emergency account.
Next, it’s recommended that you write down all your debts and include the total amount, the monthly payment amount, and the interest rate.
Here’s where things vary a bit. Some advise that you use the snowball effect and pay off debts from smallest to largest. Others recommend you pay off the debt with the highest interest rate first and work your way through all the debts until they are re-paid. I’ve chosen to pay off debts using the snowball method because I need the motivation of seeing debt crossed off the list as quickly as possible.
Once you have your plan of action, you must ensure you have a surplus of money to begin implementing your debt reduction strategy. You will have to put together a budget to see if you have any extra money to put your plan into action. If you have enough extra, you can go ahead and start paying off your bills. However, if there is no surplus, you have to find places to generate that surplus.
A few suggested places to get surplus are:
- Get a second job;
- Reduce your auto insurance premiums by raising your deductibles.
- Temporarily stop 401K contributions;
- Consolidate high interest credit cards into a second mortgage; and
- Mazimize your tax deductions. Instead of getting tax refunds each year, get the money in your paycheck each pay period.
However you choose to get your surplus, it should be used to eliminate debt. These are just a few tips and strategies that I hope you can use to get out of debt.