Debt Reduction

Do you lie awake at night stressed about how to pay your bills? Financial difficulties rank in the top three life issues that can be truly over whelming. You can tie yourself into knots worrying about your financial predicament or you can take action to correct it. Unless you’ve been faced with major medical bills, chances are your debt was accumulated over time. Hence, eliminating consumer debt won’t happen overnight. While a solid step by step plan is necessary to achieve any goal, it must be accompanied by self-discipline and a degree of self-sacrifice. Follow these recommendations from the financial planning experts to develop a plan to become debt free and execute it.

The first step is to develop a spreadsheet listing all of your consumer debt. Do not include mortgage, student loan or car loan balances. List each creditor, balance and minimum payment on the spreadsheet. Arrange from lowest, balance to highest balance. Add total outstanding balances and minimum payments.

Determine your monthly discretionary income. This is the amount remaining from monthly pay after mortgage, utilities, communications and insurance bills have been satisfied. It is from the discretionary income that the credit card balances will be reduced and ultimately eliminated.

This is where the self-discipline and short term sacrifice comes to play. Postpone all major purchases, vacations and gifting. Smaller discretionary expenses can add up quickly. Daily lunches with coworkers and designer morning coffee purchases can easily amount to over $3500 annually. These expenses must be eliminated as part of the austerity plan to reduce consumer debt. Take advantage of the awesome deals offered by groupon coupons and reduced cell phone charges by exploring one of the many value plans available from T-Mobile. These less expensive plans consult in substantial savings that can be earmarked toward debt elimination.

Set a realistic date to become debt free. Divide the number of months between now and your goal date. Divide the balance of your debt by the number of months to your goal date. This is the sum that needs to be paid towards debt reduction each month to meet your goal of becoming debt free. Best of luck to you.

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