Five Proven Ways to Slash Debt

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Public domain image

What holds you back most from slashing your debt?

  • Credit cards
  • Bad spending habits
  • Low-paying job
  • Borrowing too much
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With the economy sputtering, slashing debt has become a hot topic. Corporate downsizing has led to a glut of unemployed, sitting in the wings, waiting for their opportunity to charge back into the workplace to a decent paycheck.

Many of these unfortunate had good-paying jobs before the economy went sour. Because of that, they gambled on themselves, racking up mountains of credit card debt and small loans. When they lost their job, they still owed all that money.

This forced them to accept an inferior job at a substantial pay-cut. Now, the credit card bill that once seemed no more than a minor inconvenience that could be satiated with a minimum payment has become a frightening monster called debt.

Sad but true: the economy doesn't look as resilient as it once did. This condition will take more than an overnight fix.

Perhaps you've found yourself in a debt squeeze. The scenario above pictures your situation perfectly. Debt has you scared and running. Is there anything you can do to fix the financial mess?

The situation may seem hopeless, but, frankly, it isn't. With just a few simple adjustments you can get yourself back on your feet, streaking toward prosperity rather than scurrying from debt. Here are five simple rules that will help you untangle yourself from the slimy tentacles of debt:

1. Don't forget to budget.

Simple but true. Still, it's amazing how many people forget (or refuse) to budget. But without budgeting, you won't slash debt.

A budget is your plan. It's your road map of sorts. When you take a trip you plan your moves carefully. You don't just point your car in a direction and go. You have a destination, a goal, and you plan out how you'll get there.

That's simply what budgeting is. It's a way to get from where you are to where you want to be. Don't skip this step. It's so important to have a plan in hand for your future.

2.Pinch those pennies.

Your budget should make this a natural conclusion. Once you have your plan in hand you'll have a much better picture of what you need to do to slash debt. If you've found that your budget swims in a sea of red ink you know it's about time to start slashing.

The trick is you need to make sure what comes in covers what goes out. Once again, simple but true. Yet many don't understand how to do this. Now that you have your budget, pinching pennies should be simple.

Start with the small stuff. Sometimes the tiniest of parasites kill their host. Many times it's the small expenditures that kill a budget. Don't purchase foods you don't need. Candy, ice cream, chips and chewing gum please the palette. But most of the time they offend the budget. Carefully weigh what is necessary and what isn't. Then go from there.

Now start slashing the big stuff. This won't be easy. You may have to trade in that beautiful late model sedan for an older, more economical used vehicle. If you have too much house for your budget you may have to downsize to make ends meet. Selling a house during a downturn may cost you. But getting a little less out of it than you expected certainly beats losing it to repossession.

The key here is finding your comfort zone. Prune your expenses until you can find a comfortable level at which you can live.

3. Crimp those credit cards.

Your situation will dictate what you do here. I've heard some who scream condemnation at anyone who owns a credit card. For many of these credit card iconoclasts, their type A personalities drove them to abuse their credit score, and if someone so gifted as they couldn't handle that little piece of plastic, then it's quite obvious no one can. This is arrogance at it's height.

The simple fact is a credit card is a tool. No one would refuse a journeyman carpenter access to a power saw because there is always the chance he might cut his arm off. Are saws dangerous? Absolutely! But in the hands of a skilled craftsman, a saw becomes more than a tool.

On the other hand no sane person would hand a power tool to a five-year-old. Beyond the ludicrous nature of such an idea, that action serves no purpose. A five-year-old doesn't know what to do with all that throbbing power.

Credit cards work much the same way. Most people who can't handle them shouldn't own them. The sad fact is most people don't know how to handle them. In these situations credit cards become a danger to financial stability and a hindrance to slashing debt.

If you've had some bad run-ins with credit card companies, then, by all means, get rid of the plastic! Your credit card statement should be all the proof you need to determine whether you should keep your card or lose it.

If you do decide to keep the card, make sure to use it within the confines of your budget. If you can't do that, then pitch it. At this point you don't want to chop off any financial limbs with a power saw.

4. Start a home business.

Here's a great way to earn some extra cash. Even in a depressed economy there are almost always people spending money to pay someone to do a job they don't want to do. Mowing lawns or cleaning swimming pools may seem like a cliff-like step down from a cushy office chair. But that little extra money may mean the difference between living in a modest house and heading for the poor house.

You might even want to jump up on the global stage and start an e-business, featuring your own website. Starting an online writing business also stands as one of the hottest new ways of earning extra income. With the internet, your options are limitless. It may not become full-time work, but it certainly won't hurt your chances if you want to slash debt.

5. Teach what you've learned.

Want to permanently sear a concept into your brain? Teach it to someone else. Helping your kids understand the realities of financial life may go a long way to helping you understand how important financial stability is. And you can bet your kids will become a great source of financial accountability too. Don't think they won't notice if you break the same rules you're trying to instill in them! This is a great way to stay on course and stay in the black.

The bottom line is slashing debt doesn't take a degree in economics to accomplish. If you follow these five simple steps, you'll soon find yourself that much closer to financial stability and the freedom you've always wanted.


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