3 Steps To Reduce Debt Before The New Year

If you’re going to put energy into saving money, make sure to direct it into lowering your debt and lifting the weight of money stress off your shoulders forever.

In the spirit of Christmas (and not going into any more debt during the holiday season), I’ve outlined the three steps you need to take now to ensure you’re empowered to deal with your finances and that you’re not setting yourself up for more money stress in the new year.

Review Your Outgoing Money

One of the fastest ways of finding extra money is to go to your service providers, and ask for a discount. Providers can include: credit cards, telephone, electricity, any insurances and your landlord if you are paying rent or your home loan provider.

The approach is simple—a quick call to see if they can offer you a more competitive premium.

With each one, I would do some research on the different offers available in the market to see how your current deal compares. If your service provider isn’t willing to negotiate, find one who is.

The mortgage industry is super competitive, and we’ve often found clients hundreds or even thousands of dollars in savings just by asking the right questions and researching what’s available in the general market.

With your utilities, beside asking for discounts, you may find better value in eliminating them altogether. For example, not having a home landline and instead having all your family members with the same mobile phone provider can save you money. Eliminate the home line payment, and reduce your mobile phone bill costs, too.

Other ideas are turning all electronics off from the powerpoint at specific times and reducing shower times or having a timer in your shower to help save water. Maybe even consider taking the bus to work instead of the car or only having one car per family.

Make homemade meals. Not only are they cheaper to produce, you’ll know exactly what’s in them.

I often will spend a Sunday cooking meals and individually packaging and freezing them. But if you don’t have time for that, consider making a few extra servings when you do cook, and popping these meals in the freezer. This alone can save you hundreds per year by not buying lunches or takeaways on the weekend.

And the easy one to give up is the daily coffee purchase. Saving this $5.00 per day means a massive $1,825.00 kept in your pocket each year.

Review Your Incoming Money

Having a clear picture of the net money you have each month is vital. Once you’ve trimmed all your outgoing expenses, and you know this net figure coming in, you can start a plan to reduce your debt and eliminate stress.

If your outgoings are higher than what is coming in, you’ll need to look for ways to increase the incoming money.

Way to increase funds coming in can include:

  • Asking your boss for a small pay increase. This is easiest to do if you’re also asking for increased responsibilities or workload rather than just a pay increase.
  • You can generate money outside your employment situation as well with garage sales. Look around! Any item you haven’t used for a couple of years is probably not worth keeping.
  • If you have a particular interest, you could turn this into a small business venture for extra funds as well.

What Should You Do With Any Extra Money?

So where do we put this new found money?

There are two schools of thoughts when it comes to where to direct extra funds.

I prefer to look at the highest interest rate items and pay these down first while keeping everything else on minimum repayments. Once you’ve cleared the first debt, you’re ready to tackle the next. Continue this process until all your debts have been terminated.

The other school of thought is to order your debts from largest to smallest amount and to pay down the smallest debt first, so you feel like you have a win quickly. This typically motivates you to continue killing your debts (even the big ones), because you’ve already seen some of the smaller debts disappear quickly.

Bonus Tip: Write your debts down on a spreadsheet to help you keep track and update them monthly.

The moment you gain the upper hand over your money the more empowered you’ll feel and the faster the stress will disappear forever.

Remember, you control your money—it doesn’t control you.

This is a sponsored post by Vikki Morgan. The views expressed in this article are their own. To learn more about Vikki, visit our Specialist Panel.

image Credit: maurus/Bigstock.com

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