The Gerber Life Parenting Blog

How to Reduce Your Debt and Save Money on Credit Cards

November 21, 2012

Man Using Credit CardThe recent recession accelerated an already growing debt crisis for many Americans. Parents can easily become overwhelmed by their debt levels and the typically high interest rates that come with unsecured loans and credit cards. However, if you can maintain control and stay somewhat objective, you can systematically reduce your debt, while saving money on credit card interest and fees. Here are tips to create a successful plan to reduce your debt.

Know your starting point. Unlike an auto loan or a mortgage, credit cards and lines-of-credit balances can increase rapidly. Also, outstanding balances seldom include accrued (due) interest. Therefore, many people are unsure of their true indebtedness until they examine their most recent credit card statements and estimate accrued interest.

Analyze your current interest rates and search for lower charges. First, call each of your credit card companies and ask them to lower your rate. Should they decline to do so, search for cards that offer lower rates and excellent introductory rates for balance transfers.

Identify your fixed and variable expenses. You will have minimal control of committed expenses (mortgage, heat/air conditioning, auto loan payments, etc.). But, closely analyze your variable, discretionary expenses, such as entertainment and restaurant spending. Much like learning about your total debt, you may be surprised at your true spending levels.

Develop a budget that reduces or eliminates some expenses. You needn’t move to a one-room, unheated cabin in the wilderness, subsisting on roots and berries. Often, simply reducing some unneeded, but enjoyable activities avoids the need for drastically altering your lifestyle.

Create a debt reduction strategy. Don’t just think about it; do it. You can choose one of two popular, proven approaches. Commit to directing your cash to make larger payments on your highest interest rate card, while making minimum payments on others. A second technique is to focus on balances, paying off your lowest card balance first. Both strategies will work. Choose the technique that gives you the most motivation to continue your plan to  reduce your debt.

Measure your progress and results. This tip is the most psychology rewarding and pleasant step. Seeing the results of your sacrifices and efforts fuels your internal motivation to “plan your work and work your plan.” Input your progress into your PC, smart phone or take pencil to paper. Record your efforts, showing your former balances coming down.

These tips will reduce your debt. Be sure to leave your credit cards at home when you’re out shopping. You will be pleased at the results of your debt reduction strategy. Your family and bank account will be equally overjoyed.



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