Do It Yourself Debt Reduction?

Debt restricts what you can accomplish by taking away your future income. If you have borrowed too much money, don't beat yourself up. Make a commitment to move on and improve your financial situation from this point. Take responsibility for the fact that you have spent more than you earned and move forward.

Budget Your Money

The first step in winning financially is to establish a solid plan. A budget should be a realistic picture of what you will earn and spend, and should be updated each month. If you are married, your spouse should participate in the budgeting process. List the income that you expect to bring in for the month. Then list each of your expenses one by one. Place only the minimum credit card payments on the budget because you will deal with extra payments later. Hopefully, you have some money left over to pay extra on your debts. If you don't, you may need to trim expenses or take on a part-time job to make more money available for debt reduction.

Develop a Debt Elimination Plan

List all of your debts on a sheet of paper. Include the balances and interest rates. Stop using all of your credit cards immediately. List the debts from the smallest amount to the largest. You will work the debts in this order. Pay any extra money that you have in your budget towards the debt at the top of the list. When that debt is gone, take the money you have been paying on it and apply it to the next debt on the list. Continue this until all of the debts are gone. Consider selling any assets that you owe money on and apply the proceeds to the loan in order to further reduce debt.

The Emergency Fund

Many times people go into debt because they do not have an emergency fund. When a financial problem comes up, they use their credit cards to take care of it. Soon things are back to normal, and then another financial problem comes up, starting the cycle over again. Most experts say that you should have an emergency fund of at least three months of your income. Start putting some money away for it immediately. Even $2,000 will take care of many financial emergencies and keep you from using debt.

In Too Deep

If you can not balance your budget and pay your regular bills, let alone extra money on debt, you may have no choice but to take aggressive measures. Debt settlement can be done yourself and may work if you are past due on a bill. You can try to negotiate a payoff of less than the amount due in this case. If a creditor agrees to a settlement, make sure that you get the agreement in writing before you pay them and keep a copy of your payment forever, in case the bill comes up again. If you are facing lawsuits and garnishments, you may have no choice but to consult with a bankruptcy attorney.