No one wants to be in debt. Owing a lot to a creditor is not an ideal situation. The best course of action is to focus your energy on alleviating your debt and becoming free from its constraints. Reducing your debt must be a proactive goal. Here are some important reasons why reducing your debt is a worthwhile option.
1. Go Beyond Minimum Repayments
If you only make the minimum repayments every month, you will be in debt for quite a while. Each month try to pay back a little bit more than the minimum, increasing each time. By only making minimum repayments, you keep the debt alive for longer, while possibly accruing more. To be proactive, pay back your debt quicker and with as large of payments as you can manage. Seek debt recovery advice – there is no harm in asking for help to guide you in the proper direction.
2. Credit Rating
You should try to maintain a low ratio of income to debt. You do not want the amount of debt you owe to be larger than your income. Creditors will see this ratio and opt not to approve you for loans, or other finance options; they will see you as unable to pay the debt back because your income is not enough, and your current debt is too outstanding.
3. Quality of Life
Many factors can impact your quality of life. Quality does not necessarily have to be your level of comfort. It can also include your physical and mental health. Those with high debt are found to have high levels of stress, and suffer from depression, ulcers, and heart problems. When you are constantly worried and stressing out about your debt, your health is impacted. By extension, the health and your relationship with your family are also impacted. Take steps to reduce your debt before your health starts to wane.
With low or no debt, you have so much more freedom. You have the freedom to spend without worrying about making repayments. You are able to do what you want with your money without thinking about creditors. You also have the freedom to save. You can plan for the future much more optimistically by thinking of bigger purchases and investments.
5. Create good habits
Creating good habits instils good habits in your children. You always want the best for your children; this would include financial stability and know-how. Teach your children to be smart with their money by showing them how to alleviate the impacts of debt and the best ways to combat it. Lead by example and take an active approach to reducing your debt.
Debt reduction strategies do not have to be painstaking. Take small steps that lead to bigger ones. By being mindful of reducing your debt you are already taking a proactive approach. What other strategies have you adopted to get rid of debt?