Self Help Debt Reduction – DIY Debt Reduction
Step one is always to figure out exactly where you are right now and this can be a painful step to take. It’s not easy to see all the money you owe in one long list but it’s essential that you do exactly that as your first step. When you are just ‘guesstimating’ your debt it’s way too easy to leave things out but when you’ve got it all listed in black and white it’s pretty much impossible for you to ‘forget’ anything.
I know it hurts but start right now, get a piece of paper and a pencil ( or you can use a spreadsheet program if you prefer) and list out all of your debt. Include all credit card bills and lines of credit. Make sure that this list is complete and accurate. Put the name of the creditor as well as the total amount due and minimum monthly payment. Don’t let the bottom line number freak you out, remember, you already knew you were in debt that’s why you’re doing this self help debt reduction in the first place.
Once you’ve got all your debt written down it’s time to make out your budget. Start by listing your monthly income. Then list out all of your monthly expenses (just plug in the things from your debt list). Make sure to include things that you don’t pay every single month such as quarterly payments, seasonal expenses, etc.
Once you’ve got a complete listing of all the money coming in every month and all the money going out every month, just subtract one form the other. Subtract your expenses from your income. Did you end up with a positive number? If so good for you, you are living within your means and you can just take that ‘extra’ money you’ve got coming in every month and apply it to one bill so that you are paying more than the minimum on that bill. Once that bill is paid off in full, take the extra money and put it towards another bill. Keep doing that and you’ll be free and clear in no time.
If you ended up with a negative number you’ll have to make cuts, or bring in more income, so you can have some extra money to apply to pay down your bills. It will take time and dedication but this is a simple, yet highly effective, method for self help debt reduction.