Hand holding out a Credit Card

Burying yourself in debt is never a good idea. There’s no better time than now, whether the economy is good or bad, to get yourself out of debt. It doesn’t matter if your debt is as small as $2,000 or as big as $20,000, there is always a solution. A disciplined, well thought out approach is the only way you can reduce your debt and help to get yourself back on track.

It’s well documented in the media that people have always struggled with debt. In fact, the idea of credit goes way back to ancient China. According to FXCM, the Chinese were the first to manufacture paper using materials such as hemp or mulberry bark, and practiced the writing of credit notes on various materials as a form of guarantee for long-distance trades. Today, credit cards exist, and issuers capitalize on them, because a lot of people are still finding themselves compelled to have credit cards even if they cannot afford the repayments.

According to Ben Steverman, a reporter from Bloomberg, a typical American faces debt every month, and only 1/3 of people pay off their bills every single month. That’s about 35% of people between the ages of 25 and 50.

Make a credit list

First, before you reduce your credit, make a list. This is very important as interest rates will soar if you don’t know all of your debts. You will never be able to reduce your debt if you don’t know exactly how much you owe. If you leave even $100 out of the equation, the interest will come back and bite you someday.

Track everything down regularly

Write down all the expenses you have such as your utility bills, groceries, car payments, mortgage and mobile phone bill. This is important, as it will serve as the foundation to your budget. For example, if you spend $500 every month for the upkeep of your apartment, stick to this budget. If you spend on anything over that it should be classed as a luxury.

Improve your rates

The best way to save huge amounts from your credit card bills is to negotiate with your bank for a lower interest rate. If you can even stave off a point from the interest, you will be able to pay off a significant chunk of your debt. Credit card companies fear losing their customers the most, so a simple phone call with a polite request is all it takes. Credit card companies are always willing to please, and their decision will be based on your credit score.

Choose a payoff plan

There are two ways to pay your credit card debt. First, put your extra cash into the highest interest card while paying the minimum on the others. This is the fastest way to lower your credit. Once the first card is paid off, you will have extra cash, which you can use to pay off the next card with the next highest rate. Doing this will have a snowball effect. The second plan is to pay the card with the lowest balance first while continuing to pay the minimum on the others. Although this isn’t as effective as the first one, it’s the quickest way to paying off a debt on a single card.

Turn your progress into inspiration

Looking at your bills every day, may be the last thing you want to do but if you’re in debt, this can be an inspirational task. Seeing your debt reduced by 20% over the course of, say, two months since you started can be very motivational and rewarding. As such, it is important to update yourself regularly in order to keep yourself focused on paying everything off.