How to Minimize Debt for Greater Financial Freedom

Living day to day under the shadow of excessive debt is nobody’s dream and many a man’s worst nightmare. But the reality is that some debt is virtually unavoidable in today’s economy if you want to live a normal, functional lifestyle and you’re not independently wealthy.

How do you balance the need to use debt to accomplish important goals with the need to reduce debt so you have the freedom to actually manage your cash flow instead of just pay on debts and pay bills?

1. Save on a Smarter Car Loan

Consumer car loan debt is on the rise, which isn’t 100% bad. At least it indicates people are getting approved for car loans again. But it may also indicate many aren’t availing themselves of their best car loan deal.

Generally, you want to get a bank pre approval – and from a bank where you are already an account-holding customer. But also be willing to compare rates with financing from reputable dealerships.

Rather than simply hunting for a vehicle at the top of your pre approval number, find the most affordable option that still meets your needs and is in good enough condition that it’s not likely to need any expensive repairs anytime soon.

Then work with your lender to structure your loan for as short a repayment term as allows you to comfortably afford the monthly installments.

2. Reduce/Eliminate Credit Card Debt

Many financial experts will tell you that there is such a thing as “good debt” and “bad debt,” and that credit card debt is the number one member of the bad debt classification.

Credit cards are convenient and virtually necessary to carry out certain transactions, but your goal should be to pay your card(s) off in full each month to avoid a rolling balance with accompanying interest charges. If you can manage that, then any cash back or perks the card offers will accrue, and you’ll actually “make money” off your card.

There is no magic wand for eliminating credit card debt. Let Me Bank can help you get back on to your feet but will not fix all your problems. It’s a matter of budgeting, financial discipline, and avoiding using the card until it’s finally been paid off. Click here to learn more about reducing/eliminating credit card debt.

3. Wipe Out Small Debts First, Then Big Ones

You may have a dozen or more debts, perhaps, that have to be paid on every month. The “debt clutter” syndrome situation can be very stressful and depressing. Your wisest strategy is to temporarily pay the minimum on all large debts while you systematically wipe out all of your smaller debts.

Every time you pay off a debt, you’ll be encouraged by your progress and you’ll free up funds to apply to the other debts going forward, so that they are paid off sooner.

You can’t expect to pay off a car loan, mortgage, or student loan overnight; but, eliminate all small debts and don’t take on any unnecessary new debts. The result will be a gradual recovery of control over your finances and a feeling of “free at last” at the end of the process.

4. Increase Income & Savings

You can only reduce spending up to a point. Your strategy for financial freedom must also include boosting income levels. Start looking for side jobs to make extra cash, maybe selling items on ebay or working online, or maybe babysitting, mowing lawns, or cleaning gutters.

And finally, you have to build a savings even while you’re in debt. Otherwise, every time there’s an unexpected and/or emergency expense, you’ll be forced to seek out new financing. Be disciplined to save a certain amount out of every paycheck, at least 10% to 20%.

While there are many other helpful strategies to reduce debt and fight your way back to a truly healthy and stable financial situation, these are easily among the 4 most important. And though it may take time to make a debt-minimization plan work, it’s encouraging to know you can implement your plan and change direction in no time at all!

Share this post:

Leave a Comment