Self Help for Debt

If you're facing a mountain of debt, you may be wondering where to start to improve your financial situation. You can seek help from credit counseling services or even consider filing for bankruptcy. However, there are also steps you can take to reduce your debt on your own, which can eliminate the need to pay for help or harm your credit score.

Develop a Budget

Develop a household budget to give you a true picture of your debt situation. Preparing a written budget helps you identify all of your expenses, which allows for analysis to determine areas where you can possibly make some cuts. For instance, you may discover you are spending an excessive amount in nonessential areas like entertainment. Any additional money you "find" can be applied to your outstanding debts like credit cards, which can help you get out of debt faster.

Form a Plan

Develop a plan to attack your debt. If you have a number of different debts, consider using the "snowball" technique. List all of your debts and identify the one with the lowest balance. Apply as much money as you can to this debt on a monthly basis while making only the minimum required payment on the remaining debts. When the first debt is paid off, apply the payment to the next smallest debt, and so on, until you are completely debt free.

Work With Your Creditors

If making even the minimum monthly payments is proving difficult or you're about to fall behind, contact your creditors and explain your situation. Consider sending them a simple financial statement that lists your income and expenses. Once they see the difficulty of your situation, they may be willing to work with you. Possible remedies can include lowering your interest rates or even negotiating a settlement amount that lowers your monthly payments. If your situation is temporary, perhaps due to a job loss, your creditors may allow you to skip a payment or two.

Stop Using Credit

Your debt problem won't go away if you continue to use credit. If you have several credit cards, keep the one offering the lowest interest rate in your wallet to cover emergencies and put the rest in a location where they cannot be accessed easily. It is usually not a good idea to cancel all of your credit cards, as this could have a negative impact on your credit score if you are still carrying balances.