8 ways to reduce your Debt In 2023 - thecanadianguy.com (2024)

Being in debt can be really stressful. It’s not just because you have to pay interest but somewhere it eliminates your personal finance portfolio too. And the moment you start thinking to reduce your debt.

The first thing that comes to your mind is to cut a lot of expenses. Well, that’s not the case all the time because you can create a monthly budget or free up some of your savings.

There are multiple ways which offer you to reduce your debt without making it feel like a burden. Let’s dive in to figure out which works best for you to reduce your debt.

Use Saving to Reduce your debt

You may be worried since saving money is a difficult effort. I’m aware of that as well:) However, paying off your debt with your savings might be a very viable decision because you won’t have to pay the same lending rate every month.

I understand that having some additional cash in your bank for financial security or emergency funds might make you feel safer. However, such savings are not creating any cash for you.

And with the current interest rates offered by financial institutions, it’s hard to even say if your money will appreciate or depreciate.

Furthermore, it is difficult to even predict whether your money will increase in value or decrease in value given the present interest rates being offered by financial institutions.

Pay More Than The Minimum Payment

If you are in a debt then I highly recommend you pay more than the minimum balance offered by the bank. In countries like Canada, the bank offers you to pay a minimum of $10 so that your credit card score will not be affected.

However, if you look at the statement of your credit bill, you can see the total number of years it will take to complete the overall debt. You may want to pay your debt ASAP if you know how credit card interest rates work.

Avoid Expensive Hobbies

Have you planned a trip to Dubai this year? Like seriously? I know sometimes having a small trip will boost your energy and morale to work more but spending over $5,000 to $10,000 on a trip doesn’t make sense.

And if you are so keen to travel then I highly recommend making a travel budget so as not to feel regret in future.

There are thousands of places in your country where you can go for a trip under $1,000 or even less. You can visit museums, or tourist places and many more without making a hole in your pocket.

Negotiate For A Lower Interest Rate

Negotiating for a lower interest rate can be very helpful in reducing your debt. You can simply call your creditor to inquire about the current interest rate and ask if they can reduce your interest.

You will be amazed to see that there are thousands of creditors who are willing to work with you in eliminating your interest rates. But reducing your interest rates is only possible if you have a good credit score.

I know the pros and cons of credit cards and their possibility to hit your credit score but in order to reduce your debt’s interest rates, credit cards play a crucial role.

There are a variety of credit cards that can help you to build your credit score which can help you in reducing your debt.

Start Side Hustle

If you are very determined towards clearing your debt then choosing a side hustle to make extra money can be very helpful. It will help you in reducing your debt much faster as compared to working in one job.

Starting a Side Hustle can be very challenging for a lot of people because working full-time in one job and looking for another is really hectic. But making a few extra dollars doesn’t hurt anyone and when it comes to paying off your debt making excuses will not help.

There are different ways to start a side hustle but you can also go for passive money-making ways where you do not need to work extra 4-6 hours every day.

Pros of Side Hustle

Sell Items For Cash

Do you have an extra chair, table, mattress or even a pair of shoes which you are not using? If yes, then selling those products on the marketplace can help you to make a few dollars.

You can use eBay, Craigslist or garage sales to sell of these items. I understand that it is not possible to make life-changing money but income can help you in paying a small portion of your debt.

Consult Financial Advisor

If things are seriously going out of your hands due to your financial situation which is continuously putting you down then I highly recommend consulting a Credit Card or Finance advisor.

The financial advisor will help you in organizing your monthly budget without hurting your pocket. They will also help you align the best possible methods or options which is crucial in reducing your debt.

Benefits of a Financial Advisor Are:

File Bankruptcy

Filing for Bankruptcy can be your last best if you are not able to reduce your debt by following all these methods. As Bankruptcy can only be granted under extreme circ*mstances – loss of income – extremely high credit card debt – unmanageable medical expenses.

Filing Bankruptcy can be seen as an easy option but it will negatively affect your financial life.

Life After Bankruptcy?

The procedure for filing for bankruptcy also differs based on the chapter you choose. While chapter 13 bankruptcy allows you to create a payment plan, chapter 7 bankruptcy requires the liquidation of assets.

The procedural duration for both bankruptcy chapters ranges from six months to five years. As a result, it is far better if you begin developing solid financial habits that will keep you out of such circ*mstances.

Conclusion

I am aware of how challenging paying off debt may be, but with the right planning, you should be able to do it in a year or more.

Although I personally stick to a rule book, my monthly objective is to avoid using my credit card for more than 15% of its entire value. It not only reduces my debtbut also allows me to pay it off in full if necessary.