Debt Checklist

When you find yourself in debt, you need to address the situation or else face significant long-term consequences. Unresolved debt can interfere with your ability to secure loans, preventing you from making serious purchases such a home or a car. It can also destroy your credit rating and often involves a far larger payment overall as you work to cover interest in the debt. To help get hold of your debt, it helps to have a checklist of things to do.

Establish a Budget

Before you start reducing your debt, you need to know exactly what contributes to it. Keep careful track of all your expenditures for a given month. Write down the bill amounts when they come up, keep receipts for everything you buy (even little purchases like coffee), and take note all of the amounts on a piece of paper or a spreadsheet program. Then make a second list of all the money you have coming in: salary, contractor work and the like. Compare the two lists. It will let you know exactly how much you're spending and how much you'll need to cut to reduce your debt.

Make a Plan

With your budget established, go over it for ways to either increase the amount you take in or reduce the amount you spend. Start with frivolous expenses: eating out, entertainment expenses or money spent on vacations. Then look at your essential items and find ways to make your budget stretch, such as purchasing discounted items or generic versions of staple groceries. If you have the means to earn extra money -- such as a weekend job or a work-for hire contract -- then do that as well. Again, keep careful track of the exact amount involved, so you know how close you are to your goal.

Start Reducing Your Debt

With a plan in place, you can then take steps to begin seriously addressing your debt. If you can, set a certain amount of money aside each month to apply to the principal of the debt (you'll likely need to include interest payments as part of your monthly budget). If not, look for other ways to reduce the debt, such as a consolidation loan or negotiations with your creditors to reduce the interest rates. You can contact outside agencies for help if you need it; the National Foundation for Credit Counseling and the Independent Consumer Credit Counseling Agencies both maintain websites for helping consumers.

Stay Disciplined

Chances are, you're not going to eliminate your debt overnight. Instead, you'll need to reduce it bit by bit over a lengthy period of time. The best way to do that is to stick to your budget, not make any frivolous purchases and ensure that the principal goes down every month, even if it's just a little bit. It helps to stay motivated by imagining what life would be like without any debt. You'll have more money to make purchases and possibly save for a rainy day.