What Can You Do to Reduce a Small Amount of Debt?

Do you find yourself in a small amount of debt, say a few thousand, and seem to have a hard time finding your way out?

There are several things you can do to reduce your debt, get out of debt, and stay debt free.

1. First, make a "rough estimate" of what you "need" to spend on expenses monthly. These are the necessities, like rent, gas, food, etc.
After you have a total, deduct this amount from your monthly net income. See what you have left.

Example...
If your net income is $1500, your rent or mortgage is $300, utilities $300, transportation $120, food $300, and misc. $150.... your expenses would be $1170.

Your income ~ $1500 minus your debt ~ $1170, leaves you with $330.

You can either be very strict for a while till you pay down your debt and use the whole $330 to apply towards debt, or you can give yourself a weekly allowance or "spending money". If you gave yourself $100 of spending money a month, this would reduce your allowance towards your debt to $220.

2. Make sure you put the specified amount, in this case $220, towards your debt each month. Make minimum payment, on most, and pay the rest to what is holding the "highest" interest rate. If all of your interest rates are the same, pay down your lowest balance first. Once a balance is paid off, you no longer acquire interest on that balance. That alone can save you a bit of money to put towards your other debt.

3. Use cash as often as possible. Avoid using credit cards except in dire emergencies. You don't have to give them up forever, but they should be off limits until you pay off your debt if you are serious about becoming debt free. Once your debt is paid off, you can learn to use them with caution. Make sure that you only spend as much as you can pay off monthly, or you may find yourself right back in debt again quickly.

What else can you do?

You can try consolidating your debt if you can get a much better interest rate than what you are currently paying.

Watch out for hidden charges. Transferring to another credit card, etc., can cost you transfer fees, an added percent, right off the bat. The object is to "reduce" your interest...so be careful.

Paying less for food can free up more income to put towards your debt. Clip coupons for the things that you buy often. Use more generic brands than name brands. I've found that some store brands actually have better tasting products than name brand items in a variety of things. Substitute a couple of your name brand items a week for store or generic brands. You will save a little money, and learn what is acceptable as substitutes, which can save you a lot in the long run. Utilizing sales will also help. However, never buy a sale item that you may not use, just to utilize the sale.

Make a meal plan and grocery list before you go to the store. This can save you a little if you aren't haphazardly purchasing things.
Buying more frequently than less can help also. You won't end up buying as many things that you might not need or use right away.

If you can save even $10 a week on groceries, that is $40 extra a month that could be going towards your debt. Every little bit adds up!