When you’re in debt, it feels like you’ll never clear the outstanding balance and get back to normal. While you’re never going to make a really big dent in your debt without making large payments towards it, there are some smaller baby steps that you can take to start reducing your debt without completely depleting your bank account in the process. Here are three tips for tackling your debt and getting used to making regular debt-busting contributions to the outstanding balance.
- Round down your account balance. This can be an easy way to build up a separate amount to throw at your debts. The basic idea is to keep your everyday bank account at a round figure, such as $240, and transfer anything above that to a separate savings account. For example, if your account balance is $246.47, you can either transfer $1.47 to round the balance down to $245, or transfer $6.47 to round it down to $240. It may seem like it takes a while to build up savings using this method, but you’d be surprised how quickly it adds up. I’ve been using this method for just over a year now and managed to scrape together an extra $300 last year simply by rounding down the balance in my everyday account and sending it over to a separate savings account. In the very early part of 2010 alone, I’ve socked away $30. I always keep a set amount in my everyday account to cover my regular outgoing expenses and have a bit extra in case it’s a bad month. I don’t ever overdraw my account, and I can honestly say that I don’t miss the money. Whenever you’ve put together a good amount, such as $50 to $100, use it to make a payment on a credit card or loan and then start again. It will put you in the habit of consistently chipping away at your debts.
- Save loose change. Stashing away your loose change is another way of building up money without feeling the effects too much. I often find myself spending loose change on junk that I don’t need and wouldn’t normally purchase with my debit card, so this is a double savings for me. You don’t have to save all of your spare change, but even small coins can add up over the course of the year. I try to put all of my loose change in a tin and bag it up at the end of the year to cash in at the bank. Then, I apply all of the money saved from the loose change to debt that I owe.
- Make regular payments. In addition to the above tips and tricks, you can also make daily, weekly or monthly payments towards credit card debts. You may choose to pay a small amount on a daily basis, such as $2 per day, or pay the equivalent of that on a weekly or monthly basis. This will slowly decrease your outstanding balance, but more importantly, it gets you into the habit of making regular payments towards your debt.
What works for you? Are you disciplined enough to pay down your debt without saving little by little? We’d like to hear your feedback on the issue of paying off debt.