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One of the most popular New Year's resolutions is to pay off debt and reduce financial liability. However, it is challenging to start this process without taking the proper steps. For that reason, bankruptcy attorneys suggest taking a strategic approach to tackle debt relief over time. Here are some ways you can begin reducing debt. 

What Should You Do When Paying Off Debt?

1. Create a Budget

Overcoming debt begins with laying out all of your income and expenses, including credit cards, loans, and utilities. Start with a monthly overview and then break down bills into weekly, biweekly, or monthly payments. This process helps you see which accounts you should cover with each paycheck, preventing you from overspending and missing payments. 

Next, evaluate your spending from previous months to identify areas where you can save money. For example, if you ordered takeout many times, you can redirect this money into buying groceries. After meeting the monthly minimums on all payments, determine how much money you have left and put it toward increasing debt accounts. If you have trouble covering the minimum balances, consider consolidation or bankruptcy options with an attorney. 

2. Prioritize High-Interest Accounts

Interest is one of the most significant challenges when attempting to reduce debt because it constantly increases the total amount that you owe. To reduce your overall expenses, put extra income toward paying off the account with the highest interest rate first. Once you pay this loan off, roll the money that you were putting toward it to the next highest interest rate account. This is known as the “debt snowball” method, and it will help you pay less money on interest. 

3. Stick to Cash

If you regularly add more debt to the outstanding balance, it is impossible to pay it off fully, as you cancel out the hard work of paying off other loans. For that reason, avoid using credit cards, and pay with cash as much as possible. To prevent temptation, remove saved credit card info from all apps and shopping sites. Then, when going shopping, leave credit cards at home so that you cannot use them.

 

When standard financial tactics aren't enough to tackle debt, reach out to Hackworth, Ferguson & Thompson to learn more about your bankruptcy options. Based in Piedmont, these local attorneys offer trusted representation across southeast Missouri. Along with bankruptcy, they practice family law, estate planning, and personal injury law. Visit them online to learn more about their services, or call (573) 223-4247 to schedule a consultation.

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