Acknowledge Your Debt Problem Now to Avoid More Problems Later

If each time you sit down to pay your bills and you don’t have enough money or very little left over, then you have a problem dealing with your debts. And, like with any problem, the hardest thing to do is acknowledge it.

Once you have said to yourself I can no longer live like this, you have made a psychological break with the current state of affairs and have positioned yourself to do something about it. But what?

After you have acknowledged that you have a debt problem there are several steps that you can take in order to better control your finances:

• Step 1 – Debt: make a list of all of your debts, figure out what debts are good versus which ones are bad (student loans and mortgage vs. credit cards), and write down on a single piece of paper the total of each bad debt, the interest rate and the minimum payment.

• Step 2 – Spending: figure out how much you spend each month (and on what), and what is necessary (mortgage / rent / food / utilities) versus discretionary (eating out, cable TV, new clothes).
  

• Step 3 – Income: figure out how you can earn extra income or save more.
  

• Step 4 – Action: each month take the money that you are saving from your unnecessary spending and any additional income that you have been able to generate and send all of it to the credit card with the lowest balance.

• Step 5 - Continued Action: each time you pay off one debt, take the total amount you were paying, including the minimum payment, and attribute it to the next debt on your list with the lowest balance.
  

  **(This way you feel like you are making progress in your debt, as opposed to paying off the largest debt first which may take a significant period of time.)

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