How to Reduce Debt When You Are Broke

Being in debt with no money to pay it down can be stressful as well as negatively impact your credit and financial stability. But with planning and a concerted effort, you can make small steps to pay down debt even if you don't think you have the money. You'll need be committed to paying down debt, however, including making difficult decisions about your spending and finding extra money.

Instructions

1

Take a look at your current financial situation. You may know you're broke, but you need to know the minute details of your financial situation before you can fix it. Review your bank statements to find out how much money is coming in and where its going. Group your expenses into categories such as food, utilities and of course, debt/loans. Pay special attention to the nickel and dime spending (vending machines, magazines, etc) and items you don't really need.

2

Add up all your debt. Include total balance, interest rate and minimum payments. Take note of monthly fees you may be paying for being late or not making minimum payments.

3

Cut up your credit cards. Once your debt is down, you can reorder new cards if you think you'll need them. But if you have them you'll be tempted to use them. If you can't bring yourself to cut them up, file them away. Don't carry them with you. Hopefully you'll learn to live on cash and never need them again.

4

Reduce your spending.Quick ways to cut expenses are to reduce or eliminate cable or extra phone features. Stop spending money on things you can rent or borrow for free such as movies and books which can be found at libraries or online for free. Redo your grocery list to cut out expensive items. Shop with a list and use coupons if they will save you money over buying the generic brand. Use the Internet to find great offers, coupons and rebates on things you need to buy.

5

Sell your unwanted or unused items to make extra cash. Amazon, eBay, and Craigslist offer fast, easy ways to sell everything from books, electronics, furniture, clothes, collectibles, and more. Listing items is free on all three sites. Amazon and eBay collect their fees after the sale. Start by going room to room to find items you can sell and then list them. Within a week or even days, you can have extra cash to put towards your debt.

6

Make extra money from home. Second jobs outside the home may cost more than you earn, so a great option is to use your skills and experience to find a part-time, work-at-home job or start a home-based business. Don't look for sign-up-do-nothing work-at-home programs. Use what you know to make money. If you're a retail worker, find a home-based customer service job. If you're a teacher, find an online tutoring or teaching job or start a tutoring business.

7

Use the money you save on your expenses and you earn by selling your stuff or working an extra job toward your debt payments. If you can pay more than the minimum payment. Pay your smallest debt first to gain a sense of accomplishment quickly. When that's paid, add the money used towards the first debt to make payments to other creditors starting with the one with the highest interest rate. Each time you pay off a debt, apply the money to remaining debts.