3 Tips to Reduce Household Debt

 

When is a good time to review your personal finances: right now? When will you do it? Tomorrow? Next week? When you are shocked at the bills that arrive on your mat or ping through to your inbox, it’s time to take stock of your finances. With personal debt becoming an escalating issue in many homes, reviewing your financial circumstances is time well spent.

A 2017 survey by Nerd Wallet found that on average US households were paying nearly a thousand dollars a year on credit card interest alone. So, unless you have money to burn, read on to see how you can get your finances back on track, and save some money at the same time.

 

  • Review your debts

 

Your first step should be to itemize the debts that you have. You need a true picture of what money is owed and who it is owed to. It may be more cost effective to consolidate your debts and take out a loan with a lower interest rate to pay them off, so when you are listing your debts, make a note of the interest rates you are paying.

If you are a homeowner, you may be able to release some funds through your mortgage at a better loan rate offered from a bank. You’ll need to know how much your house is worth to understand how much capital can be released. Learn more about this here.

 

  • Create a budget

 

You need to take an inventory of where you are spending your money. Review your bank accounts and categorize each amount that has left your account. There are set costs that come out of your bank each month such as utility bills, rent or mortgage payments, but there will be payments that you make that could be categorized as luxury: the money that you spend on entertainment, for example. Set limits to your nonessential outgoings and stick to them.

 

  • Lifestyle adjustment

 

If your social habits are costing you dearly, you need to change your spending habits. Rather than going out for a meal, go out for a coffee or dessert. Instead of going to the cinema, have a movie night at home.

It’s a good idea to set yourself a goal for saving, this way it will motivate you to continue on your saving plan. Open a new bank account that is explicitly for saving and introduce a new habit of adding money to it as soon as you have been paid. Making just small lifestyle adjustments can significantly and positively affect your bank balance.

There are very few households who not benefit from regularly reviewing their finances. Take stock, and take the bull by the horns. Ignoring debt problems only makes them escalate. Check out promotions, save coupons and be proactive in saving money. A ten-minute phone call to your car insurance company could give you the opportunity to save money on your annual renewal – don’t just let the contract roll. Take control of your finances and kick your financial stresses to the curb.

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