I tend to spend money, where she would rather do without to save money. Have you ever bought something, thrown a party, or taken a vacation with a justification of we deserve it? There is nothing wrong with rewarding yourself or loved ones by splurging on material items or going on a nice vacation, but it should not take precedence over being fiscally responsible.

It is acceptable to reward ourselves once we reach certain financial goals set from a previous year or once we meet an investment goal.

Paying Down Debt – I had always made paying my debt my first priority. If I had any money left over I would “invest” what little money we had in the stock market until we needed the money to pay down our debt again.

The problem with keeping your debt paid down without changing your spending habits is that it creates a vicious cycle of reckless spending.If you are like me, you will find very little if any additional money to invest.

While reading Robert Kiyosaki’s book Rich Dad Poor Dad, he discusses paying yourself first. It took me a while before I realized how to pay myself first. Paying off debt remains a very high priority, but I do not pull money from my investments to pay my bad debt. Just as a reminder, bad debt is debt that we pay ourselves and good debt is debt that someone else pays, simply the debt of an asset.

Stop adding to your debt- It sounds simple but most people overlook this critical step to paying off debt. Accumulating more debt while trying to get out of it defeats the whole purpose, always spend wisely. Make a list of all your bills and create a daily budget so that you know how much to spend.

Identify High-Cost Debt

Yes, some debts are more expensive than others. Unless you’re getting payday loans (which you shouldn’t be), the worst offenders are probably your credit cards. Here’s how to deal with them.

• Don’t use them. Don’t cut them up, but put them in a drawer and only access them in an emergency.
• Identify the card with the highest interest and pay off as much as you can every month. Pay minimums on the others. When that one’s paid off, work on the card with the next highest rate.
• Don’t close existing cards or open any new ones. It won’t help your credit rating.
• Pay on time, absolutely every time. One late payment these days can lower your FICO score.
• Go over your credit-card statements with a fine-tooth comb. Are you still being charged for that travel club you’ve never used? Look for line items you don’t need.
• Call your credit card companies and ask them nicely if they would lower your interest rates. It does work sometimes!

Lower interest rate on credit cards – Call up all your credit card companies and politely ask the representative if he or she can lower your interest rate. More than half of the time this works according to a study. Do not close credit cards after you have paid them off because this will lower your credit score.

Some ways to pay off debt are more difficult than others, but to really hit it hard, try some of these suggestions.

1. Budget it out

Unless you write a budget, you’ll just keep overspending and not having money left over to pay off debt. Starting with your income, start writing at least a basic budget that will let you see and control where your money is going. Creating a budget is an essential step in paying off debt, and once you get one, you should create a debt payment plan with some of these other tips.

2. Pay your debts with savings

Many people would think that this is crazy, but because of how compound interest works, it’s a pretty smart idea. Savings rates these days are so low that your debt will compound more interest than your savings. This means that if you keep putting money into your savings account and leave money on a credit card, you’re going to be wasting a whole lot of money.

Since you can’t ever match your savings rate and your debts’ interest rates, you should use your savings to pay off your debt. It’s a smart idea to keep a bit of money in the bank for an emergency. You don’t want to have to charge emergencies to a credit card, so it’s a good idea to have a small emergency fund.

Beyond a small emergency fund, you should really take all your money from savings and put it to your debt. This will help you pay off your debt more quickly than just about anything else if you have a hefty amount in savings.

3. Boost your income

One of the simplest ways to pay off your debt is to boost your income. You can do this by working more hours, taking a second part-time job, or renegotiating your salary. You can also do it by cutting back on your spending. Going out less often and shopping less will help you put more money toward your debt. Also, check for other ways to bring in money, including income support and tax credits.

4. Overpay your debts

Because of how compound interest works, paying more than you owe on your debts each month is one of the most effective ways to pay down debt. Since you’re paying off the principle sooner, you’ll pay less interest over time and you’ll pay off your debt sooner. Any time you can, you should overpay on your debt payments, even if it’s by just a few pounds a month.

5. Use a home equity loan

A home equity loan is basically increasing your mortgage. If you have equity built up in your home, you can use this type of loan to pay off your higher interest debt. You can’t use this option unless you actually have equity built up in your home, though.

If you do have some equity in your home, this can be a really effective way to reduce the number of debts you have. You won’t, of course, actually be reducing your debt as much as you’ll be reducing the amount you pay as a mortgage has a lower interest rate than most other debts.

All loans carry certain risks, but a home equity loan may carry even more risks. With this type of loan, you could lose your home if you defaulted on payments, just like you would if you couldn’t pay your mortgage.

6. Make a debt snowball

One of the best ways to pay off debt is to make a debt snowball. Basically, you’ll focus on one of your debts at a time. This can help you pay off debt more quickly and save on interest payments.

Pick one debt to pay off first, either your smallest debt or the one with the highest interest rate. Pay the minimums on all of your debts but that one, and dump all the extra money you can get into the first debt. When that one is done, you’ll take the extra money and the minimum payment from the first debt, adding it to the payments for the second debt. With every debt that you pay off, you’ll have more money to put toward your other debts.

Using debt reduction programs on your computer can help you see just how this snowball process will work for you.

7. Speak with your creditors

You may be surprised at how much you can achieve by talking to your creditors. For the most part, these companies would rather get your full payments than take you to court or watch your file for bankruptcy. As soon as you have a problem paying off your debts, you should call your creditors.

Different creditors will offer different options to help you out. Some will lower your monthly payment. It will take longer to pay off your debt this way, but the payments will be more manageable. You’ll end up paying more in interest, but you’ll have an easier time working your payments into your budget.

You may also be able to lower the interest rate on your loans, which will reduce both your monthly payment and the total that you’ll pay over time. This is probably better for you, since you won’t end up paying as much money over time.

If you have documentation that you can’t pay your debts, your debtors may freeze your interest for a bit. They can knock down your monthly payments a bit and let you pay just on principle for a while.

8. Use a low rate credit card

Instead of consolidating your debt through a debt management company can be a good option, but transferring credit card debt can help, too. You can basically get one credit card with a low interest rate, and then transfer balances from your higher interest cards onto it. You’ll probably find several different offers for balance transfer systems that will give you a low interest rate for a while.

Find the card with the lowest interest rate for the longest period of time. When you transfer your balances, pay the new card off as quickly as possible. Also, don’t use your old cards or use the new card for any random charges. If you’ll have trouble staying out of more credit card debt, you should close up the old accounts and cut up the old cards.

Before you start doing this, you should read about the good and bad points of credit card consolidation.

9. Talk to a debt management company

If you really feel like you’re drowning in debt, one possible solution is to talk with a debt management company (DMC). This should be one of your last resorts, though.

Basically, a DMC will give you a debt consolidation loan, which is one big loan that pays off all your other loans. Instead of paying several payments for different debts, you’ll make one payment to the DMC each month. Usually your payment will be lower, and you might get a better interest rate than you would with some credit cards.

10. Go bankrupt

This is your absolute last option, and you shouldn’t turn to it unless you have no other way to pay off your debt. When you file for bankruptcy, the courts will claim your assets – which might include your car and home – to pay off your debts. This can be a little scary, and you should seriously weigh up your options before you step in this direction.