Paying Down Debt

Mango Grove did a brief series on Strategies to Pay Down Your Debt over the past month or so. I think a lot of the strategies they suggest are really helpful so I wanted to share them here:

1. Commit to Change
Step 1 is always the hardest right?

"Depending on what study you look at, anywhere from 70-77% of Americans are living paycheck-to-paycheck.  Many people commonly associate the paycheck-to-paycheck lifestyle as a problem only low-income households deal with, but nothing could be further than the truth.

According to a survey published by CareerBuilder.co, 21% of workers who earn at least $100,000 also claim to live paycheck-to-paycheck.   Americans, poor and rich alike, seem to be struggling to maintain their lifestyles, let alone put away any savings."

I think if more of those people could make a commitment to changing their spending habits, they'd have an easier time reducing their debt and increasing their savings.

2. Assess Your Current Situation
Once you've committed to change, you're going to need to know where to start. This part is pretty scary. Even as someone who isn't living paycheck to paycheck, it can be difficult to take an ACTUAL look at what you spend. One great resource that can help you track your spending and assess what you have and what you owe is Mint.com

3. Cut Your Expenses
Yes, cutting your expenses seems obvious and sometimes people don't know where they have any wiggle room to make cuts. There's almost always room. Are you limiting your spending on energy? Here are some tips. Are you making sure all of your "needs" are really needs? What about evaluating your cell phone plan (this is a current sore point with Mike and I since I just went over my minutes by a BUTT ton).

4. Pay off Your Debt
5. Start Saving
I think 4 and 5 should come together. Everyone handles this issue differently but for me, it's important to have a set of savings for the just-in-case moments. I wish I could remember where I saw it....but people on average have $2000 worth of unexpected expenses per year! (Don't quote me since I can't cite it). Even if you've got a lot of debt (like yours truly), try not to exhaust all of your savings in the process of paying down that debt.

6. Boost Your Income
Side jobs, Extra shifts, Raise, Promotion, etc....These are the most obvious solutions but these options aren't available for everyone. What are some other great ways to boost your income?

7. Avoid Lifestyle Inflation
I think this step is one of the hardest. Once you've got extra income, you're going to want to spend it! Remember step 1 and that commitment to change? Reaffirm that commitment NOW so that you don't slip into old habits with a bigger paycheck. Otherwise you might end up having to repeat the steps.