If your finances are in a mess, there is no better time to take control. No debt problems are unsolvable. It might not be easy or quick, but there's always a way. Debts are urgent; they grow rapidly over time, and if you're not careful they can get you into serious trouble. The earlier you deal with them, the easier they are to deal with, so we have put together an action plan to help set you on the path to financial freedom. (Learn to be your own credit counselor. See 7 Tips For The Do-It-Yourself Debt Manager.)

TUTORIAL: How To Manage Credit And Debt

Step 1: Get Real

No one ever wants to get into debt, but it comes from spending money you don't have. This could be for frivolous reasons, or you may've had a horrible change in circumstance, such as a partner passing away or medical emergency. Whatever the reason you are in debt, you cannot get back into credit if you are not honest about the situation you are in. Many people with debt do not realize the full extent of it, and many have often hidden the truth from their loved ones. To develop a debt plan it is first crucial that you look at all your debts and what interest rates they are carrying.

Pull out all of your bills and bank statements and find out the total you owe. This step will be difficult, but unless you address it now, you could be building up serious problems for the future. Once you know the total, you can start taking steps to reduce it.

Step 2: Find the Leaks

In order to address the debt, you need to know where your money has been going to get you into the current situation. Carry out two exercises. 1. Go through your bank statements and look at what your money is going on each month. 2. Carry a notepad with you and write down every cent you spend for one month.

You will soon realize that your daily cappuccino, cigarettes or cab fares are mounting up, and even $10 a day would be $3,600 paid off your debts over the course of a year.

Step 3: Stop Spending

This is the most obvious point, but so many people in debt continue shopping, spending, holidaying - utterly oblivious to the mounting debt.

So how are you going to stop spending money? Here are some simple tips that will help you accomplish this.

· Don't carry credit cards around with you.

· Do not make repeated visits to the ATM.

· Tell friends and family what you are trying to achieve so they can both support - and keep an eye on - you.

· Call your credit card companies and ask to decrease your spending limits.

· Do not sign up for any store cards or credit cards - however tempting the initial offer might be.

· Try taking a set amount of money out of the bank at the beginning of the week and giving your card to a friend or family member for safe-keeping. That way you cannot spend more than you have. (Learn how to ditch the rat race with voluntary simple living. Check out Downshift To Simplify Your Life.)

Step 4: Budget, Budget, Budget

If you have debt problems then doing a budget is essential, as you have to get a handle on your outgoings so that money can be freed up to pay off the debt. Your budget will be the road map you need to get to your destination of a debt-free life.

A new spending plan should be developed for each month, detailing your estimated monthly expenditures. To free up as much money as possible for debt repayment, you will need to create a bare-minimum budget including only the essential items. Food, shelter, debt repayments, dependent care and transportation are all essential costs. Consider in which other areas you can cut back and make savings.

For example, could you go carless? If you dig down deep and consider it, there probably is a less-expensive way for you to get back and forth to work each day. Could your household get by with only one car for a while? That wouldn't only save you the cost of paying for the car itself and its upkeep, but for gasoline, insurance, parking. And if you can't go carless, how about trading in your pricey car for one that runs just fine but is used and less luxurious?

In order to get out of debt, you have to start letting your finances rule your lifestyle, not the other way round.

Step 5: Get Saving

Are you getting the best rates on your gas, electricity, water and phone bills? You could save $100s of dollars each year by switching providers. These savings can go straight off your debts.

Step 6: Extra Dollars

By earning extra money you can clear the debt much quicker. But how?

Do you have something you could sell? It could be physical items you no longer need, items that you could make, a skill or a trade? Ebay is a great place to make a little extra cash, or you could even have a good old fashioned garage sale. Every dollar will make a difference.

No doubt you work hard already, but sometimes the only way to get out of debt is by earning extra money. Could you join the millions of Americans who already have second jobs?

Take Action Today

A little credit card debt here and there may not seem too bad - but if it is unplanned overspending, you are setting yourself up for disaster. In bad cases, debt has a dramatic impact on relationships, family and mental health. This isn't over dramatizing. When there is no money left - you can't borrow more, and the creditors are asking for money back which you've no ability to repay.

Take action today. Start at step one, and get real about your debt. (Find out how you can make use of that excess cash and improve your financial situation. Refer to To Invest Or To Reduce Debt, That's The Question.)

Related Articles
  1. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  2. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  3. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  4. Credit & Loans

    Top 5 Reasons Why People Go Bankrupt

    The biggest cause of bankruptcy in the United States is medical expenses.
  5. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  6. Home & Auto

    What to Do When You Can No Longer Afford Your Car

    Life is full of unexpected and undesired events, like layoffs or divorce. Unfortunately, these events can sometimes make your car payment unaffordable.
  7. Insurance

    Cashing In Your Life Insurance

    In tough economic times, tapping into a life insurance policy can provide a needed source of funds.
  8. Investing

    Amazon Financing Now in the U.K.: Is America Next?

    Amazon has unveiled a great credit product in the U.K. Will America be the next country to have access to this financing option?
  9. Credit & Loans

    Why You Should Use Your Credit Card For Purchases

    Responsible credit card users who always pay off their monthly balances should use their cards to buy everything.
  10. Credit & Loans

    The Fed's Interest Rate Rise & Your Credit Cards

    The U.S. Federal Reserve recently raised the lending rate from 0% to 0.25% – the first time since 2006. How does that affect your credit card payments?
  1. Can a debt collector contact me about a debt that's no longer on my credit report?

    According to Experian, a debt collector is permitted to contact a consumer about a debt that is no longer on the consumer's ... Read Full Answer >>
  2. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  3. Are personal loans considered income?

    Personal loans are not considered income for the borrower unless the loan is forgiven. In other words, you cannot be taxed ... Read Full Answer >>
  4. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
  5. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  6. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
Trading Center