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How You Can Reduce Your Debt

Tips for Minimizing the Amount of Debt You Carry

Taking on your debt can feel intimidating, especially if you have high balances. While reducing debt is often a lengthy process, there are many ways you can minimize the amount of debt you carry. Learn how you can reduce your debt here at the U.S. Auto Sales blog.

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Build Your Emergency Fund

This may sound counterproductive, but you should always make sure you have an emergency fund built before you tackle your debts. Experts say that every adult should have at least 6 months of expenses saved for their emergency fund that will not be touched except in the event of an emergency, such as a hospital visit, car accident, or natural disaster. By having your emergency fund available, you can avoid taking on new debt, which can save you in interest if the time were to come.

[ Tips for Building an Emergency Fund ]

Review Your Budget and Expenses

If you don’t review your budget and expenses regularly, it’s time to start doing so. Each month, you should know how much you have available to allocate towards needs, wants, and yourself. If you notice that certain expenses are high, consider various ways to reduce the amount you spend by switching service providers, canceling subscriptions, and limiting the amount of “fun money” you use.

So, is your current budget right for you? The general rule of thumb is to allocate 50% towards needs, 30% towards wants, and 20% towards savings or debt with the 50/30/20 budget rule. Of course, borrowers that wish to get out of debt quicker should consider lowering the percentage given towards wants and using that extra money towards debts.

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Pay Bills in Full and On Time Every Time

To avoid credit score dings, late fees, and added interest, you should always pay all your bills in full and on time every time. Credit cards, for example, charge high-interest rates for balances not paid in full each month, often in the 20% range. Basically, if you aren’t confident that you can pay off your expenses on time and in full on your next statement, reconsider making the purchase.

Tackle Debt with a Debt Repayment Strategy

Finally, anyone ready to lower their debt and save money should tackle debt with a debt repayment strategy. The Debt Avalanche Method is the recommended strategy as this method prioritizes debts with the highest interest rates, helping borrowers save as much money as possible in the long run. For those that wish to see results quickly and knock out smaller debts first, consider the Debt Snowball Method.

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