How to Legally Reduce Debt

If you have debt, you may realize how damaging it can be to your personal financial health. Many questionable organizations and individuals promise to reduce your debt, but their services turn out to be illegal scams. You can cut your debt drastically and legally on your own without the use of scams by organizing your finances, developing a plan and putting your plan into action.

Instructions

1

Put your credit cards away. Not using your credit cards, and paying for the services and products you need with cash, saves on interest charges and stops you from adding to your debt.

2

Determine how much debt you have. Make a list of all the negative debt you have from credit cards, college loans and any other unsecured debt. Do not include any mortgage or car loans you have in this, as The Motley Fool states that these items are favorable debt that has monthly payments that are considered part of your normal living expenses. The total amount of debt that you compute here is the amount you want to reduce.

3

Make a list of all your monthly income and expenses on a sheet of paper. The list should include income you have from your job as well as any additional payments you receive each month. Your expenses should include payments for your rent or mortgage, car loan, insurance, utilities, food, gas, travel, minimum monthly credit card payments, cell phone, tuition and any other expenses you can think of. Add all your income and add all your expenses. Subtract your total expenses from your total income.

4

Increase your income or lower your expenses, if the amount of your monthly expenses in Step 3 is greater than the amount of your monthly income. Increase your income by taking on a part-time job or asking for extra hours from your employer. Lower your expenses by finding less expensive places to buy gas and food and cutting back on extras like monthly travel.

5

Commit to lowering your debt by using the amount of income that you determined in Step 3 is greater than your expenses. Pay this amount each month to your credit card companies, student loan organizations and any other parties to whom you owe money. Pay more than just your monthly payments on these cards to reduce your debt.