Debt Reduction in 2024

Everyone deserves a life they are thrilled to live, and to create that life usually means acquiring strong money skills and financial preparation. Financial freedom may sometimes seem improbable thanks to the neverending expenses that threaten to take our money.

However, we believe that earning money—and more importantly, growing wealth—is available to every person as long as they can meet three basic standards:

●      Determining clear money motivations and goals.

●      Having strong spending and saving plans.

●      Managing and eventually eliminating debts.

            Debt reduction is the main hindrance to financial stability. Did you know that just last year, the average consumer debt in the USA rose to almost $4.2 trillion? That’s 14 million multi-engine planes! Or 105 million brand new cars! 

These staggering numbers mostly consist of credit card, student and car loan debts. There’s no shame in racking up debt, especially if you needed the money to help you pay for necessary expenses you otherwise couldn’t afford. Yet, being in debt is no fun, and it takes a major toll on your credit score. This in turns negatively impacts your eligibility to own a home or car, or travel and go on vacation.

If you’re ready to get out of the quicksand that is debt, this article is for you! We’re going to show you the best three ways to reduce your debt going forward in 2021 so you can work towards being financially independent!

Challenge yourself to underspend and stop creating more debt.

            Whether it’s larger debts like hefty medical bills, or smaller debts such as a trip to Macy’s, the slippery slope to accumulating more charges becomes easier when you’re already used to it.

            Reducing your debt begins with first acknowledging the total amount of debt you owe, and ensuring you don’t add on to it. This way you can focus on breaking down the number you know, and avoiding unnecessary spending that only hurts your wallet.

            In the past, we talked about creating the perfect spending and savings plans that emcompasses your money motivations. Daring yourself to underspend each week or month to stay within your spending budget will help you to stop your debt from getting bigger, as well as build your savings account to tackle payments. 

Set up payment plans for your debts, starting with the highest interest rates and fees.

If you’ve been ignoring your debts due to a lower income, the best way to finally get that weight off your shoulders is to develop a payment plan that chips away at it. Once you make a list of each overdrawn account, we recommend getting in touch with the company and/or creditor to discuss the current amount you owe, and setting up monthly payments to help bring them down.

            While you could start with the smaller bills you can afford to pay off quicker—or make monthly payments towards multiple accounts within your budget—we suggest starting with the accounts that have high-interest rates and late fees. You’ll be able to get ahead of surcharges that threaten to make your outstanding debt even larger, and you’ll cut down on how long you’ll have to pay it off, which saves you money! 

            If you already have payment plans in place, consider increasing the amount you pay each month, if you can. Make sure you stay within your spending plan and only pay what you can afford to contribute. Reducing debt can take months or years, however, it’s better to stay on track with your payments instead of falling short paying other expenses.

Work with a credit counselor or Financial Planner.

            The oldest trick in the book when it comes to reducing debt is to cut up your credit cards, create a strict spending plan and pay what you can, when you can, towards your debts. Unfortunately, these methods don’t work for everyone, especially individuals whose steep debts have left them on the brink of bankruptcy or at risk losing for their homes, cars and other valuables. 

            Working with a qualified credit counselor or Financial Planner is the next best step to not only cutting down your debts, but learning essential money skills to help you develop your financial goals and achieve them.

            When you partner with a Financial Planner, you’re able to discuss why you amassed such large debts, effectively helping you understand your own money mindset (your personal relationship with money, how you view it and how you use it).  

Knowing your money mindset is a key step in reducing your debts as it helps you refine your money motivations (how you’ll use your money to enhance your wealth and quality of life). As you work together, you’ll be able to knock out stubborn debt and create a fresh start towards financial freedom!