Credit & Debt Help

Many people believe that they are supposed to go into debt so that they can build their credit. With a good credit rating, you're able to acquire more debt in the form of credit cards, a new car or a mortgage. Unfortunately too much debt quickly becomes overwhelming and you may find yourself struggling to make ends meet. One of the best ways to address a credit and debt problem is to re-evaluate your spending habits and make plans to begin paying off existing debts.

Evaluate Your Situation

Determine how much credit you need, why you need that credit and how deeply in debt you already are. You may have started accumulating credit and debt right out of high school in the belief this would eventually help you buy a home. Circumstances change, however, and the level of credit and debt you require changes with them.

Create a Budget

Make a budget, or personal spending plan, to take control of your credit, debt, income and expense situation. List all your sources of income and all your expenses -- including current debt obligations. Often this step is revealing because some families discover they actually hold much more debt than they first realized. Sometimes the budget doesn't add up without serious adjustments, because the income is not enough to meet all of the outgoing obligations.

Live Within Your Means

If your evaluation and initial budget calculation don't add up, you will need to make cuts to expenditures somewhere. Eliminate unnecessary spending such as extra services on your cell phone or TV services and cut back on optional spending areas such as clothing and entertainment. Stop relying on credit to buy things you cannot afford and adjust your budget so that you begin spending less than you earn.

Pay Off Debt

Make a plan to begin paying off debt and do not allow yourself to add more. Your household budget included your regular monthly debt payments as part of your expenses, so they will eventually be paid off in full if you never add any additional charges. If you can find extra money in the budget, begin paying off one debt faster by sending extra with each payment. Paying off debts saves you money in the long run because you eliminate interest payments, penalties and fees.