Debt sucks. There, I said it. And in your life, I guarantee you will come across very few people who will dispute that statement. Of course there is a huge difference between good debt and bad debt but at the end of the day, whether you are carrying the good kind, or the bad kind, you still have to pay it back and that’s the part that can get someone feeling pretty low and discouraged. Seeing those statements and payment amounts starting to pile can make even the most positive person feel like there really is NO light at the end of the tunnel. But you don’t have to feel that way. There is ALWAYS a way out, there’s always a solution and with the right tools and steps, that goal of financial freedom, which seemed unattainable, will start moving in your direction faster than you thought possible. 

I see it over and over again in my clients’ success stories. Here’s a very recent one: 

“I was able to pay off $12,000 of debt across three of my credit cards that had more interest than what my student loan had. Half of my overall debt is gone!!!” - S.P.

For years, my client had been ‘working towards’ paying down her debts. But the truth was that she was really just avoiding them due to the shame she felt for being in debt in the first place. And that’s what a lot of people do. They are caught up in this cycle of wanting to be debt free but find themselves paying barely the minimum, accruing high interest rates and constantly feeling overwhelmed with their debts. 

If you’ve found yourself in the cycle too, you can get out. And it starts right now.

Here are 5 ways for you to reduce your debts so that you can live financially free:

Start with the debt with the highest interest rate 

Is it really a great deal if it costs you almost double to pay it off? Sounds crazy right? But that’s exactly what’s happening if you are paying the minimum on debt that has a high interest rate 

That’s why it’s important to address the debt that is costing you the most. The faster you can get rid of it the more money you will have available to put towards your other debts or savings goals. Put as much as you can towards your highest interest debt and pay just over the minimums on all of your other debts. Continue this process until all your debts are paid off. This allows you to get out of debt faster and pay less interest over time. 

Request a lower interest credit card

Credit card companies love to give you “offers” or increase your credit limits. That’s not a pat on the back for being a loyal customer, it’s actually the opposite. They are hoping to make more money off of the interest they are charging you for holding a balance. These so-called deals usually end up only benefiting the credit card company themselves. What they will never offer you is the chance to switch to a lower interest credit card. Yes, this is totally a thing. If your current credit card company offers a lower interest credit card, ask if you can switch to it instead of holding your balance on the higher interest card. Sometimes, these lower interest cards can come with an annual fee, but it might be worth it. Do the math to see if it’s a better option for your specific situation. 

Know where your money is going

Tracking your money is like tracking your calories. Sure you’re really good at writing down the big stuff like the three meals you had in the day, but what about that chocolate bar while you were passing through the kitchen or the half a cookie your kid didn’t finish. The same goes for money, we easily track the “big stuff”; the car payments, the mortgage, that new TV - but what about that monthly subscription you signed up for a year ago but forgot to cancel? Or the cell phone bill that includes a $2 charge for unlimited US calling but you’ve barely called anyone out of the province let alone the country. 

To get out of debt you have to start tracking your spending; truthfully! If you don’t have a pulse on where your money is going, it’s very easy to end up in more debt. Create weekly money dates to track your spending and compare your spending against your budget. This will help to ensure you have money left at the end of the month to put towards your debts and avoids the trap of over-spending and going back into more debt. Don’t have a budget? Here are 5 quick steps to create one. 

Review your credit report 

Ignorance is not always bliss, especially when it comes to your credit report. A lot of my clients will ignore looking at their credit report because they feel like they’re going to be disappointed. You may not be checking your credit report but I can guarantee someone else is, especially if you are applying for credit, a new loan or a mortgage. You don’t want to go through all the work to become debt free, apply for a new loan or mortgage and find there is something on your credit report that is blocking all of your hard efforts. It’s always best to review your credit report every few months to make sure all of the details on your report are correct. You have the right to dispute any incorrect information on your report that may be affecting your credit score.

Put any unexpected income towards your debts

Let’s be honest, getting money as a birthday gift definitely beats another year of getting pajamas from Grandma Betty or a “You’re the best Boss” mug from your colleagues. But just because you’ve been given money doesn’t mean you should find an excuse to immediately spend it. I know it’s your birthday and you deserve something nice but if you really don’t need anything wouldn’t it be nicer to be  one step closer to getting out of debt? I know YOU know it would be. So, start putting that money towards your debts. You can even apply this to other unexpected income like tax refunds and work bonuses. Instead of feeling like you just won the lottery and going on a shopping spree, put it towards achieving your financial goals. This will help you to get out of debt much faster.

There is a debt-free light at the end of the tunnel. If you have a hard time believing it, you may still be living with a few money fears that are blocking you from the financial freedom you seek. Read this to release those fears so that you can live in alignment with your debt-free dreams.  

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