Whichever way you look, consumer debt represents a major problem in the developed world. Unsecured consumer credit grew at its fastest rate in more than 11 years in the UK during January, for example, while this is a trend that is being replicated in nations such as the U.S.
America is also grappling with the cost of tuition, with more than 44 million nationals currently struggling with huge levels of debt that is increasingly difficult to repay.
In this article, we look at the ways in which individuals can avoid the accrual of longer-term debt and contribute towards a more sustainable economy.
1. Understand Your Current Debt Level
If you are serious about reducing debt, you need to start by determining your existing liability.
This can be achieved by accessing your credit report, which include details of all settled and outstanding debts.
Through this report, you can calculate your total debt total, while determining whether you have a positive or a negative credit rating. This will inform your decision surrounding future loans and the type of credit that you pursue, as you look to reduce long-term debt and create positive transactions.
Similarly, reviewing your existing debts also enables you to identify erroneous accounts, which may have been settled or included in error. These can subsequently be removed and help to instantly reduce your liability.
2. Make Regular Repayments
While it would be nice to live in a debt-free world, for most people this now seems simply impractical. From secured loans such as mortgages to unsecured debts, credit is often used to fund certain aspects of our lifestyle.
Issues can occur when you struggle to make regular repayments on time, however, as this can incur charges and increase the interest that exists on your account. So, even when you do resume regular payments, you may find that your debt liability is increased and you’re simply paying off interest rather than the principle sum.
So, remain focused and adhere to a stringent payment plan, adapting your budget where necessary to ensure that you meet your requirements while maintaining a certain standard of life.
3. Embrace Frugality and a Strong Work-ethic
On a final note, it is important to understand instances where opening a line of credit might be permissible. This applies when buying a home or a car, for example, but less costly purchases may be better funded by striving to reduce costs and accumulating savings over time.
By being frugal and reducing the cost of everyday expenditures, for example, it is possible to increase the amount of disposable income that can be committed to savings each month. This negates the need the secure lines of credit in the future, as you have the means to fund larger ticker purchases as and when required.
You can also look to improve your earning potential, either by pursuing a promotion or marketing any skills that you have as a part-time freelancer. This type of determination and work-ethic can build higher levels of wealth over time, which in turn helps you to appreciate the value of money and increase your spending capacity organically over time.