Part of Our Healthy Finance Series:

Budgeting Techniques to Reduce Debt

Reducing debt can be a mind boggling experience. When all you see is your dwindling bank account - with no end in sight, how do you go about clearing a path to debt reduction?

With a little knowledge and a concerted effort, anyone can begin creating a budget to reduce their overall debt.


First and foremost, stop adding debt upon debt.

Sure, this sounds simple, but it's of paramount importance that you quit accruing debt and that you quit it right now.

  • Use cash for your purchases, not your credit cards.

  • Ignore pre-approved credit catalogs when they pop up in your mail.

The bottom line is; if you can't pay cash, you don't buy it. Period.

Next, figure out how much you pay per month total for all of your expenses. This includes rent/mortgage, car payments, car/home insurance, utilities, credit card debt, other personal loan debt, food, gas, Internet, cable television, clothes, eating out, and entertainment - literally everything.

Now, determine your total income. Subtract this total from your monthly income total. How does it look? Are you comfortably in the positive or barely? Or are you in the negative?

If you're barely in the positive, or if you're in the negative, it's time to reduce your overall expenses.

What are you willing to get rid of? Be ruthless and red line extraneous expenses out of the picture. You can also shop around for better telephone rates, cell phone rates, and insurance rates. Make changes where you can.

Phone your credit card companies and try to get your interest rates reduced; sometimes they're even willing to negate past due and over the limit fees. Your goal here is to reduce your overall debt from your credit lenders.

Then see if you can refinance your home for a lower interest rate.

Be relentless in searching for better deals.

Pay your highest interest rate debt first, over the minimum if you can, by as much as you can. When that one is paid off, do the same with your next highest interest rate debt. This is called Accelerated Debt Payoff, and it works extraordinarily well in reducing debt fast.

If your paycheck isn't already automatically deposited into your bank account, set that up. You're less likely to take cash out if you're not going to the bank to deposit it yourself. Set up a maximum of how much you can withdraw per pay period - and stick to it.

When you have to make a purchase; take the time and search for sales and discounts. Check Internet auction sites and your local paper for gently used items to save even bigger bucks. Be a smart shopper and look for the best quality for the lowest amount out of your pocket.

If necessary, find ways to increase your income. Work a few extra hours at work; get a second job; capitalize on a skill you have (such as baking, automotive repair, computer technology) in your community, or even have a garage sale.

Make the decision now to adhere to a budget that includes some, or all, of the above techniques and you will succeed in reducing your debt to a more manageable level. The next step? Eliminating it completely so you can have a solid financial platform to build your life upon.

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