As many of the regular readers know, I had a big problem with credit card debt right after college and through most of my 20’s. Having huge amounts of debt can strangle your personal finances and can prevent you from having nice things like a home, apartment or new car, no matter how hard you work. So what can you do to get OUT of debt?

Take a Step Back and Analyze The Problem

I’m sure that most of you know 99% of what makes up your debt, whether its credit cards, student loans, a mortgage that is too big for you to handle, whatever the problem you need to identify EVERYTHING that is putting you in this situation. Don’t just take the big items, or the things you can pay off the fastest… WRITE DOWN ALL OF YOUR DEBTS. It sounds silly but having a list of all of your debts does two things for you… 1. It gives you an idea of the overall magnitude of your debts and 2. It allows you to budget to pay everything off and not forget anything.

No More Additional Debt

This step is probably the most important step of all, do not, under ANY circumstances take on additional debt. Trying to pay off debt while taking on more is like running on a treadmill and wondering why you never get anywhere… it’s a race you will never win. Cut up the credit cards, don’t buy things you don’t need and buy things with cash or debit cards only.

Set Up A Budget (and Actually USE It!)

I know thinking about setting up a budget sounds as exciting as watching paint dry, but it’s not that bad, and trust me if you can get out of under crushing debt like I did you will feel great about setting up a budget. There really isn’t anything that fancy about budgeting… you need just a couple things: your monthly (or weekly) income, and your monthly (or weekly) bill payments. (Note: you can do all of this for FREE on Mint.com)

This is where your list of debts comes in handy… make sure you include payments for all of your debts and don’t over-reach and pay too much at once because if you run out of cash you will just wind up taking on more debt to afford essentials like gas and groceries. I know it’s tempting to try to be a hero and pay off debt as fast as possible but slow down and stick to your plan or you will be back at square one.

Refinance At A Lower Interest Rate

This step is trickier than it sounds because refinancing your debt too often can reflect poorly on your credit score, but once in a while it is very helpful to take advantage of a low interest or zero interest refinance program to knock down the amount of interest that you need to pay. If you’re like me you probably get bombarded with junk mail offering 0% interest credit cards so take advantage of one or two but make sure you close down your old card if you do… don’t tempt yourself with double the amount of credit or you could find yourself in a worst situation. Also remember that most credit cards charge you a percentage of the overall balance when you transfer so be sure to factor that in as well.

Pay Your Bills On Time and Don’t Miss A Payment

With my debt I was fortunate to rarely miss payments, and I only was late a few times so my credit score didn’t take too bad of a pounding, but a lot of people I know who suffered with debt also had terrible credit. Make sure you do everything in your power to pay your bills every time and make the payments on time. You WILL get out of debt and you don’t want to suffer with a bad credit score for years after you are all paid up do you? Besides having a higher credit score will get you better interest rates which saves you money in the long run.

Unfortunately there is no magic bullet when it comes to getting out of debt, despite what those TV commercials may promise you. Getting out of debt is hard work but it’s not impossible if you have a plan and you stick to it.

When you are in debt it can be overwhelming just making the minimum payments. The trick is to dig just a little deeper so that you can begin to pay off those hefty balances. If you can manage to put a little aside each month to service your debt it becomes only a matter of time until you are debt free. The following steps will help you out of a debt crisis:

1. Prioritize

Begin by deciding which of your monthly bills are the most important. Rent and heat are usually paramount, but luxuries like satellite TV and premium cell phone packages could probably be eliminated. When looking at your credit cards, compare the interest rate that each charges. You will likely find they vary greatly, and may reach as high as 30%. Rates change frequently, so you will need to check carefully and often, but you may find that carrying a balance on one card is far more expensive than carrying the same balance on anther card.

2. Ask For A Lower Rate

Even if your credit isn’t perfect you can call your credit card company to ask for a lower interest rate. Sometimes all it takes is the initiative to actually pick up the phone and ask to save a few dollars. Remember the person on the other end of the line is human too, and chances are good that he or she has a few credit cards as well. You can also try to find a card that has a 0% interest rate on balances that you transfer to the card. You may be able to transfer from one to the other for months, or perhaps even years, without having to pay any interest. Just be sure to read the fine print, as there may be hidden fees.

3. Pay The Highest Interest Rate First

Albert Einstein called compound interest “the greatest mathematical discovery of all time”. The trick is to make it work for you instead of against you. Begin by paying at least the minimum payment amount on all of your cards each month except for the one with the highest interest rate. On this one only, pay as much extra each month as you can until it is paid off.

This is how to compound your payback. Each time you reduce the principle amount it means that you will have less interest that is charged to you the following month. That will leave more money to be applied towards the principle each month as well, which will result in even less interest the following month. And so on. When the first card is paid off, do the same thing with the next highest rate card. You will soon be able to pay off this card and your overall debt will be reduced at an ever-increasingly rate.

4. Keep going

Once you get the hang of compounding your payments it becomes easier and easier. Just pay attention to your spending habits and be sure you don’t backslide into debt again. There will always be some emergency that may set you back. When that happens don’t worry, just make sure that it is a temporary setback and not permanent. With a little self control you will be amazed at how fast you can become debt free.

Do you have a secret to getting out of debt quickly? Share it with us in the comments below!

The following is a guest post from Jason Holmes of DebtConsolidationCare.com who I’ve asked to write about ways to reduce debt… an important topic around the holidays!

If rising debt has become a constant source of trouble for you and you want to come out of the mess that your life has become due to excessive debts, then you should consider various measures that will help you to do so. What you have to first believe in is that you are not helpless. The power to eliminate your own debt lies in your hands. You have to develop a plan and consider some measures that will help you to come out of debt. You should also make sure that you stick to this plan so that you remain debt free.

Some tips that you should consider so that you can reduce your debt are as follows :

1. Try not to increase debt: One of the most important ways of reducing debt is to make sure you do not add on to your debt. This is because if you keep on adding to your debt, then by the time you will come out of one debt the other will already be there for you to pay off. It is also true that if you take on new debt it affects your payments towards your current debt as you have to pay towards both now. Thus, you should throw away all the offers of credit cards that you get. You should also try not to take out any loans as far as possible.

2. Do not spend more than your earnings: When you are in debt you must take care not to overspend. This is because you must save every bit that you can, to use it to make payments towards your debts. If you spend more than what you earn while you are in debt, then that would lead to an increase in your debt. Thus, if you want to spend on something, then find out means to earn some extra money before you spend. If you want to buy an expensive item, then check for things that you have and do not need. Sell these items on Ebay and make enough money to buy what you want to. You can also look for ways in which you can make some extra money that can be used to pay off your debts.

3. Formulate a budget to help you out: You must formulate a budget to keep track of your money. You should know where all your money is flowing. Calculate your total income and total expenses and subtract them. What is left is what you will pay towards your debts. Thus, every penny that you will waste will reduce the amount that you can pay towards your debts. A budget helps you understand where you are spending more and where you need to cut down. This helps you a lot in saving money.

4. Use the envelop method: The best way to implement effective budgeting is by eliminating all your unnecessary expenses. You should use the envelop method for all your budget categories. When following this method you are to keep one envelop for every category on your budget. You are to allot some amount of money for every category and put that amount in that particular envelop. When you are making any purchase from that category you should pay from the envelope meant for that category. You are not to make purchases in that category, that month, if the money in the envelop runs out. This way you will spend as mush as is allotted and will save enough to pay off your debts.

Using these simple tips you will make changes in those lifestyle measures that were responsible for getting you into debt. Once you start following these, you not only become debt free but also remain debt free.

Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, Take Creditors and Collection Agencies to Small Claims Court’ and, My Story- From Depression To a Smile’.

Nothing puts more stress on American families than being in debt to the point that they are struggling monthly to make ends meet. Recent American Banking Association statistics show that the average family in the US is carrying approximately $8,000 in credit card debt. Additionally, when you consider the pitfalls of having credit cards and using them, there really is no way to responsibly handle and use them. Naturally, the biggest disadvantage to having credit cards is that they are so easy to use and run up their balances.

If you have found yourself in a situation where your credit card debt is getting to the point that it is overwhelming and stressing you and your family out, here are 5 credit card debt solutions to consider if this is the case.

Start paying with cash – we call this step “going green”. Just remember that if you have high interest credit cards with large balances, making the minimum monthly payment accomplishes nothing. Stop using those credit cards and start paying cash for everything. In fact, and we know this is difficult, we recommend that you just cut them up and forget about having more than one or two at the very most to be used for emergencies only.

Think about robbing your piggy bank – if you have a savings account, you should consider what you can afford to take out and apply to your credit card debt. Despite the fact that the economy is unstable and there is ongoing market volatility, stop thinking about hanging on to your money because of job insecurity. Instead, consider the fact that if you are only earning a few percent interest on your savings account yet paying 15% to 20% on your credit cards, you’re throwing away your hard earned money.

Consider a second job – again, this may be a hard pill to swallow, but you may have no other choice if you want to avoid filing bankruptcy. If there is less money coming in each month than what is going out, your debt is only going to keep compounding. Find a way to increase that monthly income so that you can apply more to your debt.

Look into a payment protection plan – should you be concerned about losing your job or if you know this is an eventuality, then you should contact all of your creditors to see if they have a payment protection plan. Paying a few extra dollars a month now will ensure that your payments will be made for a while when you are out of work and looking for another one. It will help to protect your credit rating, but most payment protection plans do have a time limit to be aware of.

Try consolidating your credit cards with a 0% Balance Transfer – you can lower your overall debt by using a single low interest credit card to start paying off the higher interest ones. Either look for a lower interest credit card or inquire with one of your current creditors to see if they offer a balance transfer option.

Throughout our lives many of us struggle with debt, and some of us struggle more than others. Having debt at such a high amount that you can’t afford to make the payments can be extremely stressful both to your finances and to yourself. If you find yourself not able to make your debt payments any longer you have a few options including debt consolidation, bankruptcy and debt settlement.

Of these options debt settlement is one of the more popular options because you can substantially reduce the money you owe rather than taking out a loan or worse destroying your credit with bankruptcy. Let’s take a look at some of the pros and cons of debt settlement to help you figure out whether or not it is right for you.

Pros of Debt Settlement

It goes without saying that the biggest benefit of debt settlement is the fact that you can cut your debt down significantly (often 40-50% or more) all in one shot. For many people this is enough for you to get your financial life back on track and find enough income to pay off the remainder and start anew.

There are many companies that will handle debt settlement for you, and many lawyers now will handle it as well. You are also entitled to settle your debt on the phone but more often than not this isn’t a pleasant experience since most companies will aggressively pursue their money before agreeing to settle. If you don’t have thick skin then working with a company may be a better option for you.

You don’t need a lawyer to settle your debt, although having one can be helpful should you find yourself up against a large company that refuses to settle. Lawyers can help guide you through the process already understanding how it works and what to do rather than you figuring it out on your own and potentially making a mistake.

Cons of Debt Settlement

Plain and simple debt settlement can significantly reduce your credit score, not quite to the level that filing bankruptcy might do, but it’s still not an ideal way to go if you are at all concerned about keeping your credit score high. You can earn back your credit score by making on time payments going forward but there will be a period of time where your score takes a hit.

Another con is that there are a lot of debt settlement scams out there, with people and companies ready to take advantage of good people who found themselves in a bad spot. It’s important to do your research on debt settlement companies and figure out who is trustworthy and who is not. Companies like the Better Business Bureau are helpful with situations like these and will give unbiased information to help you make a decision.

Lastly one of the most forgotten about cons of debt settlement is the taxes due. When companies settle debt with you they are essentially giving you free money and Uncle Sam wants a piece of the action. Whatever amount of money you owe will need to be claimed on your tax return later that year so expect to make a hefty payment to the IRS when all is said and done.

Overall debt settlement is an interesting option if you’re really in a jam financially. It’s not for everyone and not everyone will qualify to settle but if you find yourself in an extreme financial hardship then it’s definitely an option you should at least consider.

Debt is a frustrating thing, and these days it seems like everyone has some kind of debt whether it’s credit cards, a mortgage that is too high or maybe you racked up debt trying to be a day trader. However you got there, there comes a time when debt just rules your finances and you have no choice but to settle it and see what you can get or file for bankruptcy. Since filing bankruptcy can ruin your financial life and prevent you from getting even a checking account we’re going to focus on settling debt and trying to get out of this hole first. You can work with companies or lawyers that do this but if you want to try to settle debt yourself rather than pay someone else to do it.

1. Call the company directly and let them know that you are interested paying back your debt but you need them to make you a settlement offer to do so. When you make the call be polite and most of all be specific. If you can only afford one payment let them know what that is. If you are ambiguous with your request you won’t be doing anyone any favors and both you and the representative may get frustrated with the negotiation.

2. If you don’t like the answer the representative gives you ask to speak with a manager or their debt settlement department. There is a good chance that the operator you are talking to isn’t able to make debt settlement offers so arguing with them may not get you anywhere. Most companies have specific departments to deal with these types of issues and you are better off dealing with them if possible.

3. Don’t settle for any old settlement. When you negotiate you never start out by offering top dollar right? Well credit card companies are no different and they aren’t going to give you the best deal possible right away, so you may have to play a little hardball with them to get the best deal for you. Many times you can save 40% or more on your debt so anything less than that you should politely decline and see what they come back with. Even if you cant get a deal worked out on the initial call they will likely make you an offer down the line should you continue to miss payments.

4. Take very complete notes whenever you are dealing with someone. Many of these companies are very large so it is important to note who you spoke with, what they said and better yet get a case number. You should definitely try to get something in writing either via email, fax or regular mail because people can say things but there is really no way to prove it happened if the situation goes to dispute.

5. Lastly, and this is perhaps the most important point we can make here, make sure you understand the entire debt settlement agreement before signing your name on the dotted line. You need to consider things like late fees, interest charges and other fees that can really put you back in the same debt position you were in before the negotiation. Don’t just sign an agreement until you have read it and understand it. If you don’t understand ask questions of the company or better yet … someone you trust.

Is someone responsible for your debts when you die? One of the most common questions that debtors have is what happens to that debt when they pass away. The common mistake is that people assume once they die that their debt is forgiven. Nothing could be farther from the truth. If there are surviving family members, your creditors can be held liable for the debt you left behind when you passed away. What you need to know is that your creditors don’t usually go after your survivor’s hard earned money. They typically go after your property or estate money in order to settle the debt.

Although this does not directly hurt your surviving family members by taking the money from them, it may prevent them from obtaining what you left them in your will or their inheritance. Fortunately, a number of states in the US have now placed limits on the amount of property and/or estate monies that a creditor can take. Despite these limitations, there are some cases in which these creditors will still try to obtain what you still owe them.

The only way in which creditors will forgive the debt is if there is no money or property as well as any other assets that they can take. However, in some rare cases, they may pursue the surviving family members in order to collect the balance you left behind when you passed away. This is typically happens whenever joint debt or joint property is involved. Since many married couples today have joint checking and/or savings accounts, it becomes possible for the surviving spouse to be held legally responsible for that debt, even if the debt was generated by the deceased.

How you can prepare

If the surviving spouse is financially unable to pay off old debts and handle the daily expenses of life this can create major problems and stress for them. Unexpected deaths are nearly impossible to prepare for, but there are certain things that you can do in order to be prepared financially should this happen. When you have debt, you need to discuss this with your family members by telling them what you owe and who you owe it to (creditors).

Not only does this make them feel that they are a part of your financial planning, it also enables them to start preparing for their own futures. If you become terminally ill, it is wise that you and your spouse (if there is one) start working on getting your debts paid off. Just be aware that if you decide to leave your assets to your children, other family members, or both that creditors will stop at nothing to get the money that is owed to them.

One of the best ways to avoid having your family members in and out of meetings with attorneys and creditors is to use your savings to pay off as much of your debt as possible. It can get pretty confusing when it comes to figuring out what happens with your debt when you pass away. However, you should still be aware of the above and plan ahead for it.

Understanding that you have too much debt can be a tricky realization to come to. In my experience when the debt builds up people avoid it like it doesn’t exist, hoping it will go away. How do I know this? Because I have been there and done that.

Eventually there comes a point where you will realize that you have too much debt, and for some of us that point comes sooner than others which makes it easier to fix. So how do you know you have too much debt? I’d love to whip out some magic ratio saying if you make x then y is too much debt, but everyone is different so that wouldn’t work. Instead, let’s look for some of the warning signs.

If you only have enough cash to make the minimum payments every month, you probably have too much debt. Not having free cash flow can bring down even the strongest businesses and the same goes for individuals and families. If you have so many credit cards that you can only apply the minimum payment then you definitely have too much debt and you need to find a way to cut it down.

If you transfer money from one credit card to another to avoid making payments then you definitely have a debt problem. Yes, transferring balances to low, or zero, percent interest cards can save you money over the long term, but every time you transfer a balance from one account to another you get charged a fee (usually 3-5%) that is instantly tacked on. With that one transfer you could have cost yourself hundreds of dollars.

If you have to use credit cards to buy things because all of your cash went toward your payment, then you could have a serious problem on your hands. Not only do you only have enough to make the minimum payment, but you are increasing the amount of debt on the back end. I don’t have to tell you that this could really add up quickly and spiral out of control. If this sounds like you I would suggest getting help with your debt immediately.

Lastly, if you can’t be honest with yourself about your debt, you probably have a problem. You can fool a lot of people with your finances but being honest with yourself about your debt can be really tough. Don’t worry though, there are a lot of people going through the same problems. If you can take this last step, I would suggest you talk to a professional immediately to see what your options are. Paying off your debt now can make a serious difference in your life and take a lot of stress of your shoulders.

There’s still a serious stigma attached to personal bankruptcy. People view it as a sign that you’ve failed, that you’ve been reckless with your money and that you’re now trying to take the easy way out.

But filing for bankruptcy is hardly a free pass. It comes with serious consequences, ones that can negatively impact your life for a full decade. Before you file for bankruptcy protection, then, make sure that you’ve considered all of your other options. There is nothing easy about bankruptcy.

If your debt is too high, if they’re keeping you awake at night or if they’re negatively impacting your personal life, bankruptcy may be an option. But remember, it should only be a last option. Only if you can’t pay down your debt through personal loans, home equity loans or with the help of family members should you seek bankruptcy protection.

There’s a reason for this: A chapter 7 bankruptcy, in which your creditors forgive your debt, remains on your record for 10 years. That’s a long time. During this time, you won’t be able to qualify for many loans. And when you do find a lender willing to lend you money, you’ll pay high interest rates for the privilege. This holds whether you need to borrow money for a car, house or to return to school. In chapter 7, you might also lose your most important possessions, including your car and home.

Chapter 13 bankruptcy is a less severe form of bankruptcy. In it, you agree to a payment plan set up by a judge that allows you to pay back your creditors on a timetable that you can afford. However, even this less severe form of bankruptcy comes with huge negatives. Chapter 13 stays on your credit report for seven years. During this time, again, you’ll struggle to take out loans that don’t come with exorbitant interest rates or fees. You’ll also struggle to qualify for even the least attractive of credit cards. Having a chapter 13 bankruptcy on your record is hardly an ideal situation, either.

Sometimes, though, there is no other option. In these cases, don’t feel guilty or feel like a failure. Bankruptcy protection is there for a reason: to offer some assistance to consumers who are down on their financial luck. In today’s challenging economy, the number of bankruptcy filings is rising quickly. There’s not shame today in admitting that you’ve suffered serious financial hardships.

Our country is full of people in debt because we love to spend money that we don’t have. Once in debt, we regret our actions and want to get out of debt as quickly and painlessly as possible. There is no one that can disagree to that statement.

However, many people don’t want to take the actions and those few steps forward to rid themselves of their debt. If you are one of those people then you really should consider debt relief options as ridding yourself of the debt that you have incurred can really give you a true peace of mind and ease your stress. If you are someone that is ready to look at some of the most popular debt relief options then you are in the right place as I’m going to discuss with you some of those in this article.

When it comes to debt relief options, there are several that you have to choose from. You just need to choose the right one that suits your own needs as well as your financial needs. Pretty much there are five options. You can continue making your regular monthly payments that have originally been agreed on. You can opt for debt consolidation, debt management (or credit counseling), and debt settlement. The fifth and final option is bankruptcy.

The creditors will obviously want you to stick with the first option as interest rates will continue to be charged because of late payments. It really isn’t the most suitable option for anyone – you’ll be making minimum monthly payments for a long period of time and could possibly never see relief.

Normally when you opt for debt consolidation, you are paying very high interest rates and you have a loan that is the length of a mortgage loan – 15-20 years. While this may be the best choice for some; others it is not. Keep in mind that you practically have to borrow money for this to work and isn’t that how you originally got in this place to start with? My personal opinion is that you are only creating another problem for yourself.

Credit counseling is very popular among residents in the United States. You simply consult a debt management company and they’ll consolidate all of your debt into one monthly payment. That monthly payment is given to the debt management company rather than your creditors. This is an option chosen by many but isn’t always the best option for them in the long-term.

Debt settlement is a popular option among many that owe debt. You are able to settle with your creditors or negotiate a pay-off balance. This balance is a certain percentage of your full balance of your debts. This is probably the best option (at least in my eyes). You’ll find this is the shortest-term payoff that you can find and is probably the most suitable for your financial needs.

Your last resort should always be bankruptcy…never should this be the first debt relief option on your list. You will have to deal with personal and financial consequences. You should try to avoid bankruptcy at all costs – try all other options before making the decision to use this one.