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One of the businesses that is booming right now is that of “credit counseling.” These are professionals who help you with debt reduction through such means as debt consolidation and debt negotiation. The idea is that you can have someone else take all of your debts for you, and roll them into one payment. You pay the professional, and the professional pays your creditors. For some people this works really well. For some, though, do-it-yourself debt reduction is a more desirable choice.

Debt reduction: do-it-yourself

If you are generally an organized person, and you have the discipline necessary, it is possible for you to take care of your debt reduction on your own. But you need a plan that you can stick to. Here are some things you can do to get on track for your do-it-yourself debt reduction:

1. Figure out your income and your expenses. Tote up everything you earn and everything you spend. You might track your income and expenses for a couple of months to get a better idea. Figure out where everything is going.
2. Decide where you can cut back. Look at what you have left over each month, and decide what you can cut back on. Are there ways to reduce your grocery bill? Can you eat out only once a month instead of once a week? Find out how much “extra” money you have each month.
3. List all your debt obligations. Next, armed with the information you have regarding your “extra” money, make a list of all of your loan (this includes credit cards, which are loans) balances and the minimum payments on each.
4. Pick a debt and apply your “extra” money to it. Your minimum payments should have been listed in step one to make this really work. Pick a debt on your list. I think starting with the lowest balance is a good way to feel as though you are making solid progress. Pay the minimum payment and then apply 75% of that “extra” money toward the debt on top of the minimum.
5. Go on down the list. After you have paid off the first debt on your list, move to the next. Note that your “extra” money now includes what you used to pay on your minimum payment for your first debt. So, if your minimum on the first debt is $50 and you have $100 “extra” each month, you will put $75 toward the debt, on top of the $50. Your total is $125. When the first debt is paid off, take that entire $125 and apply it to your next debt. You can see where this is going. You’ll start paying off your debt faster and faster.

Professional debt reduction

If you don’t think that you can do the do-it-yourself version, go ahead and contact a professional. Compare fees and costs, though. Remember “credit counseling” is a for-profit business. You will pay some fees for having someone else handle your debts. And you want to be aware that it can affect your credit score. So be prepared for that.

But no matter which route you choose, it is important to remember that you need to change your outlook on debt if you want to live truly debt free. You need to stop amassing more debt and practice discipline in your discretionary spending. And you need to start saving money. After all, whether you do-it-yourself or get professional help for your debt reduction, if you don’t stop spending, you’ll be right back where you started.
Miranda Marquit is an editor for DestroyDebt.com, an informational site about getting out of debt.

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