We live in the age of debt. A large percentage of people live above and beyond their means, and the interest in many cases becomes so great that individuals and families eventually can end up in a bad position. They have to either make a ton of sacrifices or even declare bankruptcy in many cases. When it comes to debt it also happens to be a major cause of stress and anxiety which can lead to health problems.
So knowing that money is important, but that our health is more important lets have a look at some some of the best ways to reduce debt fast.
The Best Way to Reduce Debt Fast is to Not Have It In the First Place
Now this may seem fairly obvious, but if it is so obvious why are so many people in debt? As long as there have been humans on planet earth is as long as we have been fueled by instant gratification. We see that shiny new phone, computer, car, boat, new clothes or accessories and start foaming at the mouth. In all of our excitement we start spending money on things that we shouldn't.
Start a Budget Spreadsheet - By being aware of what you are able to save, spend, and knowing that your needs are taken care of will allow you to get out of the living month to month battle. Awareness is a key component to any strategy to reduce debt fast or to avoid debt fast. Without awareness, it's pretty hard to put together a plan or even recognize the need for one.
(image credit - Andres Rueda via Flickr)
Lose the Impulsiveness - How many things do you have sitting in a box untouched, sitting uselessly in storage or hanging in the closet unworn that you "had to have"? If you are like most people the answer is "way to much". If you were simply to delay a few days, weeks, or whatever time frame you need to drop your initial excitement about making a purchase and let your logic take over you will cut a lot of waste out of your spending by default.
What If Your Already in Debt?
Before I dive into the meat of the best way to reduce debt fast, lets get a better understanding of debt. There are two types of debt, there is good debt and bad debt.
A good debt is a debt that is tax deductible and has the potential to earn you interest. (I live in Canada, so tax law is probably different for you but conceptually this concept stands) For example, a mortgage on rental property here is typically tax deductible, the property itself has the potential and is likely to appreciate in value, and the property can generate a monthly income.
A bad debt is typically not tax deductible, and is attached to a depreciating asset. It usually comes to you in the form of a credit card statement, or is attached to that car or boat you had to have.
Reducing Your Interest Payment Will Help you Reduce Debt Fast
To start your plan to reduce debt fast, you may want to start by looking to re-structure or consolidate your debt. Now this is something that mathematically makes sense. However if you were to consolidate your credit card debt into a secured loan of some sort and you racked up your credit card debt again, you have actually set yourself back significantly.
This is why when looking re-structuring/consolidating debt I would always suggest that people work with a debt councilor to hold you accountable.
Now if you still are left with a pile of credit cards or other random bad debts, pay the minimum payment on all of them except for one, and pick off the debt that you can pay off the quickest. By doing this you will be be able to reduce the length of time you carry the majority of your debts by, therefore reducing the overall interest accumulated. (Once again work with a counselor, as there are exceptions to this when there are large interest rate differences in some cases.)
Look For Opportunities to Make More Money
Making more money is obviously one of the best way to reduce debt fast provided that the extra income is used to pay down debt.
Look for Some Extra Hours At Work - Say you make $20 per hour, if you were able to pick up an extra 5 hours per week...that would be an extra $400 to pay down your debt each month.
Earn a Passive Income - There are tons of work from home opportunities. Try to find one that you enjoy and could do as a hobby. If you are passionate about what you do, there is a good chance that you will make money doing it.
I hope one of these tips ends up being your best way to reduce debt fast. Remember that if your habits are likely to be passed on to your kids, so start teaching your children good money habits early. Staying out of debt, and having money saved up will help you live a much more stress free life.