Debt Reduction Takes Planning

Every day we are bombarded with advertising messages that intrigue us with the remarkable nature of their product.  All of these ads present a compelling story.  Life will be so much better with a new car.  The latest skin care product will take ten years off your appearance.  A vacation in the Caribbean is just what you need to relax.

The temptations are everywhere and before you know it, you find yourself deeply in debt.  You continue to open new charge accounts.  All of your credit is maxed to the limit.  You are living in a house that’s more then you can afford.  The bills are piling up and you’re not sure where to turn.

Step back.  Take a deep breath.  Face up to reality.  It’s time to take control of your spending and take action to reduce your debt.

Credit cards make it easy to spend more than you can afford.  When the money isn’t coming directly from your bank account and you won’t see the bill until a month later, you can be out of control in a blink of an eye.  So the first step in debt reduction is cutting up your credit cards.  Pick one card to keep for emergencies only and destroy all others.  Keep in mind that an emergency is something like a car repair or a visit to your dentist.  Buying a new pair of shoes before the sale is over does not constitute an emergency.

Next you need to analyze your debt against your income.  Start by itemizing all of your monthly expenses, using the minimum payment on each credit card.  Estimate your variable expenses like groceries, gas, entertainment, etc.  Now compare your income to what you need to pay out.

If the debt is greater than the monthly income, you might benefit from meeting with a credit counselor.  They can negotiate credit card payments and offer suggestions for consolidation of your debt.

If there is money available after your debts, then you need to establish a firm budget and stick to it.  Pay extra money to credit cards with the highest interest rates.  Look for ways to cut back expenses – for example, take you lunch to work, rent a movie rather than going to a theatre, skip the weekly manicures.  If you need to trade down to a less expensive car, there are reputable dealers who offer guaranteed financing.  There are always ways to eliminate expenses.  Don’t think of it as a sacrifice but rather a means to living a debt free life.

Once you get into a routine of spending consciously and see your debt to income ratio shrinking, you will feel lighter and less stressed.  Life will be good again.