Personal debt is like a ball and chain around the ankle. It drains you financially, mentally, and emotionally. With some good advice however, you can knock down your debt and begin to see the light at the end of the tunnel.Here are a few tips for you to begin your journey back to financial freedom:

  1. Monitor Your Spending: First things first, you’ll need to keep careful track of how much you’re spending each month. Log every dollar you spend (even that $1 bag of Doritos from the corner store) and see where you can cut down. Eliminate unnecessary monthly expenditures (yup, that usually means the fun stuff like cable and zombie club memberships) and make a commitment to reduce spending whenever possible. This will free up some extra money that you can put towards making your monthly debt payments.
  2. Negotiate A Deal: Now that you’ve got a few extra dollars for those monthly payments, you should call the customer service departments of your creditors and negotiate a reduced settlement and/or lower interest rates. Believe it or not, you won’t need your boxing gloves; they’re usually willing to negotiate and you may get off the phone feeling a lot better! This especially applies to you if you’ve defaulted on payments and your debt is in collections.(Shoot, they’ll be happy to get anything from you defaulters! Trust me, I’ve been one myself.)
  3. Prioritize: Next, you should prioritize the debt with the highest interest rate (usually your credit card balance) while making minimum monthly payments on your other bills. Pay as much as you can on your priority balance to save money on interest payments. Keep in mind however, if you owe on credit cards with teaser rates (that’s just a fast-and-easy term for adjustable introductory interest rates), you’llalso need to prioritize those payments to make sure you pay them off before the expiration date. Depending on your plan, abnormally high interest rates could apply past the expiration date. Be sure to keep yourself informed- if you’ve stuck your head in the sand, praying the teaser rate will apply indefinitely, you’re bound to get an unpleasant surprise one day. Knowledge is power, even if you’re flat broke.
  4. Transfer High Interest Balances to Low Interest Cards: Another way to lighten your load is to transfer high-interest rate balances to lower-interest rate credit cards. You’ll take on a balance transfer fee (usually ranging from 3-5%), but it’s a nominal investment when you consider what it could mean for you in the long run. Do be careful though- you’ll want to read the fine print on invitations to make balance transfers. There could be a lot of ugly hidden in there; likethe rates are only low temporarily before they skyrocket and set you even further back than where you were to begin with.
  5. Stick With Cash: Finally, you’ll want to put away the plastic and start using cash. Studies show that people are far more willing to spend credit than cash- especially on impulse purchases, not making the connection between their monthly bill and the items they want. By contrast, people tend to be more conservative with cash and won’t fork it over as easily. So after you figure out your budget, get to an ATM at the beginning of the week and make a pact with yourself that you won’t spend more than what’s in your hands. Then relegate yourself to Garbanzo Bean City, where your money is always safe at the cash register. (You’ll also be safe in Oatmeal Village and Rice Town, where the food is always filling and your pockets are always full!)

Above all, remain aware of your obligations to your creditors. Sure, it’s unsettling to even think about debt, but ignoring the issue won’t make it go away. Just open those bills and get cracking on your debt reduction plan. In a years’ time, you’ll be very happy you did.

About Michael Austin

Michael Austin is a blogger, personal finance guru and a credit card maniac. While he enjoys writing on topics ranging from benefits of an authorized user on a credit card to hard given choices of debt free life, he also loves giving free tips to friends who call him any time they're in need of advice when choosing financial services. Soccer, bikes and traveling are all topics you can discuss with him any time.

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