Debt Elimination & Reduction

Our society is one that encourages debt, and this makes it especially hard to get yourself out of trouble and maintain your lifestyle once you find yourself in trouble. The temptation to rely on credit to help with "unusual" expenses or get you through a rough patch is one that will land you deeply in debt if you are not very careful.

Debt Reduction

If you find yourself deeply in debt, reduction should be your first concern. First, you will need to create a budget to deal with your finances and prevent yourself from getting further in trouble. Once you have a list of your expenses, be very tough with yourself in cutting any expense that you can reasonably live without. Make yourself uncomfortable -- it will pay off -- but make sure you can stick with it. Start making minimum payments on all of your credit cards, except the one with the lowest balance. Apply every extra cent from your budget cuts to that credit card balance. Once it is gone, start applying all of that money to the next lowest balance. Whatever you do, do not start charging things to any of your credit cards. You should now be living exclusively on cash and debit, and if you can't help yourself, stop carrying your plastic. If your credit is good, consider consolidating your debt in a low interest personal loan. This will reduce the amount of interest that you pay, and will help you make one payment.

Debt Elimination

Debt elimination is best done by making regular payments on your credit card and other debt until the money is paid back, however there are companies that promise quick debt elimination or an instant reduction of your debt. This kind of debt elimination can be damaging to your credit score since the transaction is listed as "forgiven" rather than "paid," but if you are on the verge of bankruptcy, it could be the best option for you. Consumers can't negotiate with credit card companies for debt elimination on their own, so contact a reputable debt elimination company through the National Foundation for Credit Counseling (see Resources). If you would rather work on interest rate or debt reduction, contact your credit card company and ask them for the loss mitigation department.

Extreme Measures

While most debt can be reduced or eliminated in a reasonable amount of time with hard work and by sticking to a good plan, some debt may require more drastic measures. With large amounts of debt, or to pay off a mortgage quickly, some people take second jobs and apply every cent of the extra paychecks to their debt, plus as much of their regular paycheck as they can spare. Things like cable television, Internet, and snack foods can be cut, as well as new clothing or expensive haircuts and coffee drinks. Nothing is off limits for the extreme budget slasher except things that you literally cannot live or work without. Most financial experts do not recommend stopping savings or retirement to pay off debt, but it is not uncommon to take that step to truly get out from under debt.