Debt Reduction

Once debt has accumulated to the point that the stack of bills, collection letters and reminders, require their own storage unit, most people have planted their collective heads in the sands of denial and hope it will all go away. As absurd as that sounds it does appear to be a common practice, especially in this recession. Some believe overwhelming debt is a choice of greed over common sense. This is true for some but, not all. Some relied on poor financial management skills and short term ideology instead of long term vision. Of course those that suffered an unexpected catastrophic event are not culpable, but are still in debt and need some answers and help. This
discussion is for everyone as help is universal. I will forgo the lectures and stern warnings; it’s a little late for that. What follows is a common sense, straight forward approach to reducing and getting out of debt. Follow these guidelines and be ready for some very hard work.

Asses: First, gather all of your bills, late notices, collection letters etc.
Sort: categorize and stack in the following piles: priority, necessity, luxury, impulse purchase.
List: Make a list of all obligations using the same headings listed above. Use one page for each category. Layout: company, item, date of purchase, amount owed.
Review: Priority should be mortgage, rent, or lease, plus utilities, (not cable or satellite), health insurance. Necessity-speaks for itself; food, car payment (list all vehicles), car insurance, gas, etc. Luxury; come on list them, look at those bills, especially a credit card you use all the time for say daily coffee fix, lunch, drinks after work, dinner out, movie or theater tickets, sporting events, clothes (hey, unless you are walking around in shoes with holes in them, you don’t need 20 pairs), jewelry (there is no such thing as necessary or priority jewelry), plasma, flat screen etc. TV’s, laptop, pc, cable, dish, cell phone etc.
Impulse buys are just that; cool mugs, plates, field glasses, you know what I am talking about, stuff you DO NOT NEED except you had to have it because it was cool.
Professional Time: Now that you have everything assembled, get out the phone book and call a debt counselor. They will assist you from here. All of the information you have gathered they will need. Be ready to eat some humble pie and get on with it. Oh, and cut up your credit cards. If you are in the second category of debt; serious illnesses, catastrophic event, contact a debt consolidation company. You need immediate help and while your credit score will suffer, you won’t. You can’t have anymore credit cards, but you probably stopped using them anyway. What these companies do is lower your stress so you can focus on getting your life back together. You will still have to pay off the debt, no question, but it will be in a manageable way.

Commitment: No matter what the reasons are for your debt, remember this: once you get it under control keep it there and no matter what strive for this simple goal: always have a special account that will carry you for six months, period. Do not use it for anything else. This will also help you become a disciplined and smart consumer.