Seemingly harmless at first, debt can quickly turn into a problem that resembles a bottomless pit without a rescue rope. Serious debt can seem uncontrollable and the task of eliminating it may appear impossible. However, developing a debt elimination plan and sticking to it can help a consumer in a debt crisis get back in control.
Assess Your Debt
Figure out exactly much debt you have by making a list that includes the total amount owed to each creditor along with monthly minimum payments and interest. Knowing the total amount to pay off can result in a huge challenge. Break it up in to smaller, more achievable goals.
Create a Budget
Make a budget with categories such as rent or mortgage, groceries, utilities, child care, credit card bills, medical expenses, auto loans, gas, entertainment and cell phone bills. List how much you have spent in each category over the past three months to see where your money is going and where you can cut back. For example, if you frequently eat fast food for lunch, decide to pack your meals from home and use the savings to help pay credit card bills. Once you've created a budget your income can handle, follow it.
Call Creditors
Most creditors are willing to work with those in need rather than not receive any payments at all. The Federal Trade Commission (FTC) states consumers should explain their financial situation to a creditor to see if it offers a program to lower the interest rate on a debt or reduce the monthly minimum payment. If medical bills are part of the problem, call the medical establishment's billing office to set up an interest-free repayment plan and to inquire about financial assistance. Many medical facilities offer discounts on medical bills to low-income individuals and families or to those in a financial crisis.
Pay the Debt
Look at your list of debts and work on paying off the smallest amounts owed first. According to Dave Ramsey, eliminating the smallest debts first will provide debtor with extra money to pay off the larger debts.
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