Financial Planning: Reducing Debt

Financial Planning: Reducing Debt

Comparing 196 beneficiaries before and after debt relief, and controlling for debt-relief amount, having an additional debt account paid off improves cognitive functioning by about one-quarter of a SD and reduces the likelihood of exhibiting anxiety by 11% and of present bias by 10%.

Debt causes people a lot of stress and reducing it seems to be impossible. However, consider these quick tips on reducing debt:

  • Make a budget to keep track of your expenses vs. income
    • Doing so will allow you to see what you’re bringing in versus what you’re spending.
  • Don’t take on more debt
    • It seems obvious but people tend to ignore that taking on more debt will only create more problems for them, and not to mention- more debt to pay off!
  • Pay off your high-interest debts first
    a. This is a no-brainer; paying off these debts will help you save money in the long run.
  • Reduce the number of credit cards you have
  • Contact your creditors about repayment plans
  • Consider speaking to a credit counselor
  • Organize your debt
    • To figure out what’s making the biggest impact on your budget, collect recent statements from all of your creditors. Write down the creditor, amount owed, monthly payment, and interest rate on your accounts. Knowing which debts have the highest minimum monthly payments and interest rates will help you determine which debt is costing you the most.
  • Consider consolidating your debt
    • If you’re dealing with multiple debts, you may want to consider debt consolidation or combining all of your debts into a single loan. This may allow you to pay off your debt with one monthly payment, which is often much lower than all of your previous monthly payments combined.

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More about the author: Harry Sherdil

As a fiduciary financial advisor at an independent firm, Harry strives to offer the same resources, tools, and research as bigger firms while serving new and existing clients' best interests.