It always seems much easier to build debt than to reduce it. And, as a result, many people have larger debt balances than they would prefer. Working to reduce debts takes a focused and proactive and disciplined approach. But, the good news is that you can reduce your debts over time by following these 7 tips:



1.Discretionary Income- In order to repay personal debts, it is important to determine what your available monthly discretionary income is. To determine this, create a list of your household expenses and your household income. Your discretionary income is the amount that you have left over at the end of each month. It is important to understand your discretionary income as this is the income that you can use to lower your overall debt amounts.

2.Create a List of Debts- Create a list of all your debts by name, total amounts owed, interest rates for each account and then list in order from highest interest rate to lowest interest rate. This list will enable you to have a clear picture of how much is owed as well as can enable you to create a priority list for repayment. Many debtors are surprised when creating this list as they discover that they have more debt than they originally anticipated.

3.Modify your Spending Habits- One important step to take when working to reduce debts is to change your spending habits. While modifying spending habits can provide discomfort for many individuals, it is a healthy financial exercise to participate in. Working to create a budget that will work for the family long term will not only enable debts to be repaid quicker but can also facilitate long term financial savings which are important for a variety of financial goals including retirement. The most discretionary income that you have available, the faster you can repay your debts. In many instances you will need to make changes to your current spending habits so that you can free up additional cash to put towards your debts.

4.Begin a Repayment Strategy- Once you have discovered your discretionary income strategy and your total debts in priority, you can begin a repayment plan. You will want to take your entire discretionary income and apply it to your highest interest rate debt. For the remainder of the debts, pay the minimum amount monthly. Once the highest interest rate debt has been paid, take the entire payment amount and apply it to the next highest debt on your list. It is important to follow this system as if you pay even amounts over all of the debts you will not be able to repay the debts as fast. So, utilize discipline and pay your debts in order and stay focused over time so that they are repaid in the quickest way possible.

5.Increase Personal Income Sources- In addition to decreasing your expenses, you can also work to increase your income. Consider the possibility of overtime if you are paid on an hourly wage. If you are on a salary, consider freelance work in the evenings or part time work. There are a variety of websites available where you can post your information or where you can bid on projects that will quickly increase your income.

6.Call to Reduce Interest Rates- In addition to working on the above strategies, you can also call your creditors to see about reducing your interest rates. Many consumers are surprised when they do make the calls at how many creditors are willing to reduce the interest rates. By reducing the interest rates, the monthly required amount to pay on each debt will be reduced, freeing up additional cash flow to repay all of the debts faster.

7.Consider Consolidation Loans- Search for consolidation loans or lower interest rate credit cards to transfer your current balances onto. By lowering your interest rates you will be lowering your monthly required repayment amount and the total debt owed over time. There are many options available for consolidation loans, including home equity loans, home equity lines of credit, personal loans and loans specifically designed to act as consolidation loans. As you search for options, be sure to evaluate the lenders, the interest rates offered and the repayment plans so that you can make the best financial decision for you and your family.