Reduce Debt Without Credit Counseling
5 Smart Moves
By Jed Jones
Being in debt can feel like having a heavy weight chained to your foot, dragging you below the surface and drowning you in unpaid bills and a deteriorating credit score. Here are 5 smart moves to unchain yourself from that debt without resorting to credit counseling.
Move #1: Ask your credit card company for a lower rate: Your credit card company wants to keep your business. After all, if you carry with them a large balance at a high interest rate, you are paying them a hefty fee every month. Try calling them and asking them to reduce your rate, explaining that you have received lower-interest offers from other companies and that you are considering transferring your balances away unless they can match those lower rates. Believe me, your credit card company would rather keep some of that income than have it reduced to zero. Remember, there is no need to get nasty or threatening with them. Just be matter of fact about it and see what happens. If they refuse, go ahead and apply to other, lower-interest cards.
Move #2: Improve your credit score: A 50-point improvement in your credit score can save you $1000s per year in debt payments by making you eligible for lower interest rates. Do whatever you can to improve your credit score, including ordering your credit reports on the Internet and quickly correcting any errors you may find there.
Move #3: Pay yourself weekly: You may already have a monthly budget. If not, go ahead and prepare one. Then, divide it into 4 and make it a weekly budget. Now, pay yourself and your spouse a weekly allowance. Once your weekly allowance is gone (even if it is only Wednesday!), agree that you will halt all further purchases until the following week. This is a hard one to implement in terms of willpower. I suggest having 2-3 savings accounts and having one account for each week of the month. This is an easy way to keep track of how you are doing that week in terms of sticking to your budget.
Move #4: Keep a spending diary: Each evening, write down roughly how much you spent that day in a special spending diary or notebook. Create three columns: one for the name of the item, one for how much you spent, and one with a comment that labels the item “need” or “want.” For the wants, write a sentence or two about how that want was more important than your getting out of debt. By doing this, you will become much more self-aware about your spending habits.
Move #5: Set debt pay-down milestones: Everything is easier to achieve if you have clear goals in mind. Write down only your total unsecured debt. Now, think about the next 6 to 24 months and determine a realistic timeframe during which you will pay down that debt. Next, set two or three pay-down milestones during that time period and write down what your total debt balance will be by each milestone date. Then, as time passes, do periodic checks to make sure that you are on track and make adjustments accordingly.
To loosen the heavy weight of debt from your foot without resorting to credit counseling, you need to become more aware of your spending habits, improve your credit score, be smart about how you spend, and set goals for paying down that debt. You will soon be sitting pretty and debt-free.