According to the Federal Reserve, American credit card debt was nearly one trillion dollars at the end of the third quarter of 2020. This considerable amount of consumer debt means that many families need strategies to help them get out of debt.
If you feel overwhelmed by your current financial situation, you need to understand that you are not alone. We’ve identified eight strategies that you can use to reduce your debt load and get your financial situation back on track.
1. Put Your Spending On Pause
Before you create a plan to reduce your debt, you have to push aside the temptation to add more. Put your credit cards in a safe place — just not in your wallet — and don’t apply for any new accounts. If you want to take things a step further, you can put a freeze on your credit profile, which will prevent new accounts from being opened in your name.
2. Make A Budget With Your Family
Take a look at your budget and determine whether there are ways that you can reduce non-essential expenses while you are getting out of debt. Do you need your entire cable TV package? If you’ve been having dinner delivered, can you cook at home more often instead?
Pro Tip: Use free online resources. Plan and track your progress with the Credit Union’s free, and easy to use online budgeting tool. It can help you create a personalized budget fast.
Once you’ve gone through the work of trimming your budget, sit down with your family, and discuss the new changes. Having everyone on the same page and accountable to one another will make it much easier to stick to the plan. It also eliminates surprises and bad feelings from dealing with spending cutbacks as they pop up.
3. Find Creative Ways To Put More Money Towards Your Debt
Sometimes you have to get a little creative when thinking about coming up with the money to pay down your debt. Here are some ideas to consider:
- Get a part-time job or start a side business
- Have a garage or yard sale
- Sell any unused items you have lying around the house online
- Put any refunds or cashback rewards straight to extra debt payments
There are many ways to earn extra money that may help you eliminate your debt more quickly. Once you’re out of debt, you may have stumbled across your favorite new way to build your savings – starting with our Online Savings with easy 24/7 access and exceptional rates. For even higher interest and longer-term savings goals, check out Rainy Day Savings. It has a super-high earning rate on balances up to $2,000. You can even get an account for each member of your family to maximize your earning potential.
4. Only Buy What’s On The List
Experts at the USDA estimate that as much as 40 percent of groceries that Americans buy each year are thrown away. That’s a lot of money that gets put in the garbage. Create a meal plan for exactly what you think your family will eat each week and stick to it—the same thing for clothing, gifts, or other miscellaneous shopping. Have a plan before going to the store (or shopping online) of what you need to buy and then stick to it. If you need an accountability buddy, bring a friend or family member, or have them “approve” your online order.
5. Cash Only
Going to a cash-only spending strategy is a great way to keep yourself disciplined and on track for getting out of debt. You can help to further reduce temptation by putting the amount of cash allocated to each category in your budget into an envelope. Once that money is gone, any additional expenditures should be reserved until the next month. Withdraw up to $415 per [day/visit?] cash through our national network of over 30,000 shared ATMs. To locate the one nearest your location, text your Zip Code to 91989.
6. Work With Your Creditors
Your creditors are often willing to work with you to help get your debts to them repaid. Consider reaching out to your creditors to negotiate a potentially lower interest rate. If you are struggling to repay your outstanding balance, you may be able to negotiate with your creditors to pay back a reduced amount.
7. Use The Power Of Momentum To Pay Off Your Debts
If you can afford to pay a little extra to your debts, pay against the highest interest rate balance first, while making the minimum payment on each of your other debts. Once that high-interest balance is paid off, take that payment and add it to the minimum balance on the next highest balance. Continue this momentum until you’ve paid off your last debt. Paying more than the minimum balance can save you years in interest costs and stress. Plus, once your debts are paid off, you can put that money toward saving and investing.
8. Bring In The Experts
If your debt load seems too complicated or overwhelming to attack your own, consider getting advice from the experts. Reputable and financial advice that is not designed to sell but give unconditional support is helpful. There are many independent organizations you can turn to – but always reach out to your Credit Union first for thoughtful, personalized advice. An ideal first step is to schedule a Financial Wellness Check. It’s our relaxed review of your finances, goals and issues with one of our experts. With no strings or pressure, its only purpose is to help you find easy ways to cut costs and earn more while avoiding costly financial pitfalls.
Working your way out of debt can be hard but we know you can do it. Revisit these tips to stay on track and get your family back on the road to a bright financial future.
This article was developed in partnership with Balance Pro.