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5 Steps to Systematically Reduce Your Debt

15 August 2018 No Comment

Young or old, it’s a fact that most Americans are in debt. From baby boomers to millennials, household debt has continued to increase over the last few years. In fact, eight out of ten Americans are in debt. While this likely doesn’t make you feel better, it may help a little knowing that there are others in the same predicament as you.

While it may seem hard to overcome the battle that is debt, the journey may be long and frustrating at times, but it’s definitely possible. Here are 5 steps to follow if you want to reduce your debt and become more financially stable.

1. Get the Big Picture

No one really likes to sit down and figure out how much debt they’re in, but if you’re serious about reducing your debt, you’ll need to have a complete understanding of how much debt you have and who you owe money to. Take the time to make a master list of your creditors, how much total debt you have, your monthly payments, and interest rates. With all of this information, you can come up with a plan of attack for paying down your debt.

Most people prefer to use the snowballing method of paying off debt. This involves paying off your highest interest rate debt first by paying double if not triple the minimum payment. But putting a lot of money towards this debt, you’re actually able to save money and pay off debt quicker because less money goes towards interest.

2. Budget & Save

Once you know how much money you must put towards debt each month, you’ll want to budget. Figure out how much money you have left over after bills. Don’t forget about personal and household costs, such as groceries, gas, and other necessary purchases. By taking the time to budget your money, you can determine how much extra money you can put towards paying off your debt. The more money you put towards your debt, the better.

The second part of budgeting is knowing how to start saving money. Chances are there are plenty of opportunities to trim your budget and to cut costs. Effective ways to save money include:

  • Cooking at home versus eating out
  • Being more energy efficient
  • Using public transportation
  • Enjoying free entertainment
  • Cutting cable or bundling services

By working towards cutting costs and saving money, you can put a larger chunk of money towards your debt, allowing you to pay off a loan or credit card much sooner.

3. Consider Debt Consolidation

Do you owe debt to several different lenders? Not only is it easy to lose track of making payments to different creditors, you also have to worry about different interest rates and payment due dates. To make paying off debt a little easier, consider debt consolidation. This involves wrapping all of your debt into one big loan. While this typically means a larger payment, you don’t have to worry about different interest rates, due dates, or dealing with different creditors.

Debt consolidation can also save you money in the long run, especially if your new loan is approved at a lower interest rate.

4. Make More Money

Saving helps, but you can also start to pay down your debt by making more money. Some people may seek out a second part-time or full-time job, but there are other less stressful ways to bring in a little extra income. If you have clothes you no longer wear or household items you don’t use, you can sell them on eBay or on other online auction sites. This is an easy way to make money while also reducing clutter.

Another way to make money is to take on simple odd jobs. Mow the neighbors grass or pet sit their dog. You can also make money online by taking surveys or writing product reviews. If you’ve got time to spare, use it to beef up your wallet!

5. Watch Your Spending Habit

After paying off debt, you may be tempted to take on more debt. When you’re in the process of paying down a loan or credit card, one of the worse things you could do is to take on a large amount of debt. Though it may be tempting, you’ll only put yourself back into a hole if you make a big purchase.

Keep track of your spending habits. Make sure you stick to your monthly budget so that you can keep on track with reducing your debt.


Deciding to tackle your debt once and for all is a serious decision. As you start to see your total debt decrease, it’s much easier to stick to your plan. In due time, you can be debt free and enjoy total financial freedom.

If you have any advice or helpful tips for getting out of debt, share your experience in the comments below.

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