Credit card debt is one of the biggest causes of stress and anxiety for many people in today's world. Unfortunately, too many people get caught in credit card companies interest free offers, and spend more than they can ever afford to repay.
Now that the credit crunch has firmly hit home lenders are no longer willing to risk credit in the same way, and so getting loans and mortgages are becoming much more difficult. Unfortunately it looks like we're in for a rough ride as the boom days of easy credit are gone.
So with the credit crunch now upon us and credit card debt spiralling out of control, the need to reduce debt is now a necessity for everyone.
But how do you reduce your debt?
Credit Counselling has been around since the 1950's and is an effective way to get out of debt provided you can continue to pay the minimum payments, and you aren't more than 6 months behind in repayments.
As an example, if you have $3,000 or more of credit card debt and would like to consolidate all of your unsecured payments into one low monthly payment every month, then a Debt Management Program might be best suited for you.
However another alternative in reducing your debt is to use a method called the snow-ball effect.
Basically you need to list all your debts from the smallest balance to largest. For any debts of comparable size, the ones with the highest interest rates come first. This allows you to determine which of your debts gets priority.
Then, you pay the minimum monthly repayments on all the outstanding balances accept for the smallest debt. All the money available then goes to paying of the smallest balance first, until that debt has been settled. Then repeat this process with the next lowest debt, and so on, until all your debts are paid off.
With each debt you pay off you'll have more money to put towards the remaining balances. This is a fantastic way to get out of debt and also provides a positive mental outlook as you will actively see over time all your debts being paid off.
Remember, if people actually made rational mathematical decisions, they wouldn't be in debt in the first place. I know from experience that the debt snow-ball method works and works really well. Continue paying only the minimum on the highest owed debts and concentrate all your efforts on setting the lowest balance first, then simply repeat the process.
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