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Tips to Reduce Debt

Geoff Langenberg,

August 05, 2015

Retiring Your Way, Managing Your Money


Everyone has different debt of different sizes. Could be a mortgage, car loan, or miscellaneous bills. In a perfect world, we'd all be debt-free, but while that isn’t likely, here are a few tips and techniques to make your debt more manageable.

The first step in reducing and eliminating debt is analyzing spending and creating a budget. As you analyze your spending, it's likely you'll find that the issue lies in the eternal struggle of “what is coming in vs. what is going out.” A good way to accomplish reducing debt is to ask yourself this question: “Are my expenses equal or less than my expected income?” If your answer is “no,” where can you cut back? The good news is, it is easier to control what is going out than what is coming in.

Basic Recommendations

  • Pay yourself first by saving or investing at least 5% of your income. Apply what is left over to your needs, bills, and other miscellaneous debt.
  • Keep housing or rent costs within your means. Pretty simple, right? Don't over-extend yourself. Run the numbers and make sure that you can afford it.
  • Consider large purchases for at least 24 hours. Many times we make big purchases on a whim. We get caught up in the moment, get excited, and make the purchase without thinking it through. Sleep on it before you make the decision, discuss it with someone you trust, and decide whether it is cost-effective and affordable.

Needs vs. Wants

  • One of the most powerful budgeting tools is the ability to tell the difference between a need and want.
  • Needs: Basic costs like a roof over your head, food, transportation, clothing and personal care.
  • Wants: Everything else! Newer car, bigger house, designer clothing, eating out, cable, etc.
  • If you can cut back on some of these wants, you can save yourself a significant amount of money. Instead of buying coffee, brew it at home. Instead of name brand products, try generic brands. Try biking to work or carpooling. Shop sales and use coupons. Eliminate some of your clutter by donating it and receiving a tax deduction, or sell it.

Basic Debt Reduction Techniques

Once you have analyzed your spending, created a budget, and cut back on the wants, use the extra savings and apply them toward your debts using a few different methods.

  • Use the Snowball Effect. Start by listing all your debts from smallest to largest. Start by paying off the smallest debts first and working your way towards the larger debts. Once you have paid off one debt, use the savings from that and apply it to the next debt, and so on. You'll find that having a smaller list of debt seems a lot more manageable and less stressful and cluttered. Check out our Snowball Debt Reduction Calculator, our Retirement Education Center, or this articlefrom Dave Ramsey.
  • List all your debts by interest rate. Determine which debt has the highest interest rate and accelerate payments on it. By eliminating a high-interest-rate debt, you will likely be saving the most money in the long run.
  • Use budgeting tools, like this handy worksheet, or a site like, to track your spending. Try and trim 5% of expenses so you can put that towards paying your debt faster.

You don't have to cut down to the bottom line or live in squalor. By making a few changes or adjustments, you will be amazed at the savings!

Everyone has a different budget as well as different needs and wants, and everyone has a different story. While the numbers are going to be different for everyone, just applying the basic principles will help you to reduce debt faster.

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This blog article is for informational purposes only, and is not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.