Self Help For Debt Reduction

Dealing with debt can be overwhelming, especially if you haven't really looked to see how much you owe. Finding out the truth can bowl you over. But if you're ready to adjust your ideas about money, get your finances organized into income, expenses and debt payment, and commit to a plan, you can get yourself out of debt.

Get Debt Payoff Calculator

A debt payoff calculator lets you list all your debts, amounts owed and interest rates. Some budgeting software comes with these calculators. You can also download them from the Internet. Vertex42 has a free calculator download for Excel (see Resources). Once you've entered the amounts, you can play with payment options. The debt calculator will show you how much money you need to commit to debt payment each month in order to meet your goals. It can also show you which payment plan will result in paying the least interest.

Choose a Payoff Plan

Choose which way you want to pay off debts. One approach is to pay off the smallest debts first, then take the money you put toward paying that debt and roll it into the next debt, eventually having a "snowball" effect in which you have a large sum with which to tackle big debts. Another approach is to pay off debts with the highest interest rates first and dedicate only minimum payments to other debts. The idea here is to save money on interest and use that money to pay debts. Both approaches will help you pay debt down.

Make a Budget

Without a budget, debt payoff plans may not work since you may find yourself without food or gas money after making your debt payments -- which will throw your financial system into chaos. To reduce debt, you need order. MSN Money proposes different budgets in which you dedicate 50 or 60 percent of your income to essential expenses such as rent, food and insurance and devote the rest to "wants" and paying down debt. Line up the amount you've committed to debt in your budget with your debt payoff calculator monthly payment to keep your finances on track.

Set Achievable Goals

Looking at a pile of debt can be discouraging and in the early stages, the small dents you're able to make look insignificant. Take a long view. You're not just paying off debts, you're learning a new approach to finances that you can use to be financially healthy the rest of your life. Set achievable goals for each month and celebrate making them. This will help you stay on track.