5 proven debt reduction strategies

5 proven debt reduction strategies

There are numerous reasons why people get into debt.  In my own case it was lack of management skills. I simply was not good at handling money.  I was an academic, a man with 4 university degrees and I was constantly broke.  That is why I developed the Debt to Wealth system we call back to the Black.  I was educated in academic subjects at school, had a university education but was not skilled in life tools like managing money, crazy but true.  As I have said before, there have been times when my head hit the pillow and I worried. I worried because I simply did not know how I was going to earn a living in the next few days never mind months or years. At one point I was out of work and went to sign on and saw a rough lad that had been at the school where I was a temporary teacher. That was a wakeup call, my wife and I determined to get ourselves on an even keel. We have done so and you can do the same.

Borrowing is an effective way of getting money before you have earned it but please do remember it can have a negative impact on your life.   There are various reasons why you may need to get a loan, these include losing a job unexpectedly, raising money for a business venture or sadly in some cases, paying for a divorce. These are just some common reasons; there are hundreds of others that may apply to you.  This does raise the fact that some debt can be good. Raising money for a business venture is good debt because it is a debt that is temporary and is designed to bring back more money to you.  Borrowing money for beer is a bad debt because it does not increase your wealth in any way, assuming you are drinking it.

Bad debt is a problem when you are unable to meet the obligations set out in the loan repayment terms.  This can get out of hand if the person keeps borrowing from different creditors and does not have an effective method in place on how to manage or repay the loans.  If this applies to you there are 5 proven debt reduction strategies:

Burrow into the details

Many people actually panic when they realize they have accumulated a mountain of debt and have no idea on how to get out of it.  Remember what I said about debt:

‘ debt is spending other people’s money’

Dr Graham Lawler

author of Back to the Black How to get out of debt and stay out of debt

You need to get yourself out of that situation and the first step is stop debting.  Do not debt today.  You do not need that coffee from that well-known high street name. You can still have coffee just make it at home and carry it in a Thermos.  The average coffee drinker buying in town spends £2500 a year just on coffee.  If you ignore inflation this is £100 000 (about $150 000) in a working lifetime, enough to buy ¾ of an average home in many areas in the UK. Remember all you have had is a coffee. When I travel, I use the restrooms services on motorways BUT I carry a flask and have my coffee in my car.  This saves at least £50, about $75 every week.

So start burrowing, notice I said burrow not borrow.  You cannot get yourself out of the mess unless you know how it happened. Write down all of your spending and do so every day.  Always carry a notebook and pencil or note in your phone, this is vital.  Knowing the nitty gritty of your enemy will help in destroying the debt. Find out how many credit cards you have and cut them up except two. Pick the two with the lowest interest.  Use one and keep one as a backup in case the first is ever refused. I have one just for fuel and business and one for personal expenses and I know the interest rate on each of them.  They get paid off in full at the end of each month.


Put your financial goals in writing

This will help you get things into perspective and it will give you more incentive to manage your money more effectively.  When you know what you want to achieve in a given time, you are more likely to achieve it.  Don’t think in terms of a budget, think in terms of a spending plan and follow the 80:19:1 rule (see another post on this blog). That will help you live below your means and reduce the debt.  A spending plan is a vital tool in managing your money and will help you limit your spending.


Equity loans

It is possible to borrow money against your home. I am not a fan of this system.  If you do not have your spending in check it can just sky rocket the debt. I know someone who has just terminated a long-term (5 year) relationship because of debt.  Alan couldn’t stop Natalie from spending so they have parted.  You should also see if you can transfer debt to a zero % card.  Use the payback system mentioned in Back to the Black and you will see the debt clearing every month, financial freedom is possible.


Avoid paying monthly minimums on your credit

Target your card debt by paying the most you can on the one with the highest interest rate and the minimum on the others.  Then, when the biggest debt is clear, take on the next one and so on. You will enjoy the feeling of relief when the cards are clear, I know I did BUT only if you do not debt today.  From now on, as much as possible, be a cash only spender. If it is not in your pocket, you cannot buy it. Keep one for emergency use, one for things like fuel and so on and stick to cash. That is the only sure fire way of killing this debt off.

Get an extra income

Look around your home. If you have stuff you have not used in 3 months then you do not need it. Photograph it and get it onto an auction site. Turn junk into cash, it really does work.

To your success



5 Comments on "5 proven debt reduction strategies"

  1. Graham

    Excellent advice and I must admit to have heard it so many times before from people that this is the way to control and reduce/remove debt, but how many people actually will do these things when in trouble.

    They will go to Starbucks, grab their expensive coffee and bemoan their hard times with their friends who might also be in the same situation.


  2. thanks Dave
    do you know I once worked it out that someone who buys a coffee every morning will spend about £50 000 in a lifetime on coffee. You could still have the coffee in a flask for pence but people want ‘the experience’, so they pay big time for it. That is fine if you have the money but crazy if you do not.
    to your success

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