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Planning Your Way Out Of Debt Staff - Mortgage Lenders Plus.com

Start by reviewing living expenses and income. Prioritize your bills; look at what's most important. Number one, first and foremost, every month, your home and anything that goes with your home; number two, your car; number three, your utilities, because no sense in keeping up your home if it's there’s no water or power; then food. Once you’ve penciled out those requirements, start thinking about unsecured debts such as those credit cards. Every debt relief program has a plan, and this is how it begins.

Cover essential expenses and then, the first part of your debt consolidation program should be to pay off debts. Trying to save with debt hanging over your head often will be self-defeating.

Lay out the credit cards and look at the interest rates. After monthly essentials, the next priority in your debt relief solution is to throw as much as you possibly can do on that highest interest rate card. Pay the minimums on all the other cards, but throw as much money as you can at the most expensive debt.

For example, you’ve got one card at 20 percent. Once you've got that card eliminated, then go to the next card, maybe it's at 16 percent, and pay as much as possible on that card every month. You start knocking off those high interest rate cards and pretty soon your debt relief program is going to show some effect.

Once debt is whittled away, start saving by building a cash reserve or emergency fund. Many people run up debts because they have no cash reserves. And many people run up debt because they have no discipline, which is what a debt relief program should help to instill. But we learn everything in stages; a great tool for building up cash reserves is an automatic payroll deduction. If you can’t deposit it on payday, you won’t miss it. Meanwhile, there’s a savings account or IRA or some sort of automatic investment program working on your behalf.

One of the important elements about charging into a debt relief program is understanding what behavior you want to change and what part of the program that got you into trouble in the first place you may want to keep. Obviously, you’ve got to stop buying on credit for a while.

Cutting up those cards, however, can hurt your credit rating in the long run. Part of your debt relief solution should be keeping a few of those accounts open, using them sparingly and paying on them regularly. Keep your credit card balances below 50% of their maximum and you’ll get positive points on your credit rating. One day, that rating will matter once again.