If you are in debt, then there's a very good chance that it isn't your fault. You are a good person, and you have every intention of paying back what you owe. Unfortunately, life keeps throwing obstacles in your way, and you are now in a position where you feel you just can't get out of the hole you're in.
With that in mind, here are some personal debt reduction tips to help you get back on firm financial footing.
1. STOP! You will not get out of debt by going further into debt. Stop using your credit cards now. Whatever it is, it can wait. No excuses. It is time to stop making a bigger financial hole, and time to start building a solid foundation.
2. Evaluate your current situation. It may take some time to do it, but this step is absolutely vital to turning things around. You need to keep track of all of your expenses, down to the last cent. Be brutally honest as you do this, and remember that no one else ever has to see it. Then list all of your income, regardless of source. Next, write down all of your debts, making sure to record the principal, interest rate and minimum payment. You now have an accurate picture of your current situation--a starting point.
3. Take a breath and prioritize. There can be a lot of stress that goes along with personal debt reduction, but here's an easy way to be more relaxed about it. You know how much is coming in and how much is going out, so now it's time to figure out which expenses are the most important. Generally speaking, anything you need to stay alive or keep the income coming in should be among your highest priorities. Food, shelter, utilities, medicine, and maybe an automobile are good examples. Low priority items could include cable television, an extra cell phone, cigarettes, and junk food.
4. Get your spending under control. This is the natural extension of setting your priorities. In fact, if you have prioritized properly, then this step will be relatively easy. Now it will just be a matter of eliminating or reducing the lowest priority items. Keep working your way up the list from bottom to top, lowering each expense by as much as possible. If your income is extremely limited, then be sure the highest priority items are taken care of first.
5. Attack! By now you should have freed up a lot more money by reducing expenses on low priority items. Use this money to start paying off the debt with the lowest balance, and pay the minimum on all other debts. Then, once the lowest debt is paid off, move on to the next one. Remember, you now have as much as you were spending on the other debt, and that should be added to the next debt's minimum. Financial experts call this the snowball method and is one of the most effective methods of personal debt reduction.