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How Can I Reduce My Debt?

Getting into debt is easy. Getting out, though, can be a struggle. But you're not alone. As of October 2001, Americans today were sitting on more than $1.6 trillion in consumer debt, reports the Federal Reserve Board.

Whether your debt load is $1,000 or $100,000, you can bring it down to zero. Here are the steps to help make it happen:

  1. Pinpoint your position. Excluding mortgage, determine how much you owe between cars, credit cards and other debt. At the same time, calculate how much discretionary income you have to begin whittling away at your debt load.
  2. Map out your strategy. Establish a Zero Debt Day to celebrate your freedom from debt. Base your plan on three factors: time, discretionary dollars and total debt. For instance, if you owe $2,000 and can allocate $100 a month exclusively to debt reduction, you'll be debt free in around two years, depending on interest. Also, getting out of debt requires a sacrifice, one which will affect all members of your household. Enlist your partner's support, or risk defeat.
  3. Make the plan realistic. Be willing to do what it takes to get out of debt ASAP. Consider this: If you allocate $500 a month to debt reduction, when you're finally free and clear you'll have $6,000 additional cash a year for lifestyle enhancement, or to send ahead for retirement. At the same time, if you make yourself miserable, your plan will fail. Consider splitting discretionary cash in half — part for debt elimination; part for living (and playing) expenses.
  4. Put away the credit cards. Too often, we pay off one bill, then pick up new debt in the process. A better way: adopt a cash-only policy.
  5. Gradually build up a cash cushion for emergencies and regular expenditures. This way, you earn interest rather than pay it. Some people pay for vacations and new cars in cash, using money they saved in advance, rather than borrowing.

  • Did You Know...?
    RAM Research Site This link will open an external site in a new browser.  has a list of credit cards with low interest rates.

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How Can I Reduce My Debt?

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