by B. Taylor

Created on: December 29, 2008   Last Updated: February 10, 2009

People splurge at holiday time. The best way to avoid debt is to not get into debt in the first place, but January 5th is a bit late to start thinking about that. What is done is done. The Holidays are over, and when the cold realization hits that one has spent too much money, now is the time to make a plan. Do not put off dealing with debt because as time passes, interest accrues and the debt increases.

Step one is to gather all credit card statements and look at the interest rates. Sometimes it is surprising just how different they are. Transfer as much as possible off of higher interest rate cards and onto the lowest one. Also, if there is a card that charges an annual fee, close this account. There are plenty of free cards.

Step two is lower existing credit card account rates. Call the credit card companies and ask! Say you will transfer the debt to another card if they cannot accommodate you. You may need to (politely) ask to speak to a supervisor, or somebody with the authority to change your terms. Often, the credit card company wants your business and will work with you to keep it. If not, however, it still never hurts to ask.

Once the consumer debt is consolidated into one place with the least interest, commit to pay more than the minimum every month. For most credit card accounts, paying the minimum every month will simply keep a person in debt. The bank makes money by charging interest, and they want credit card holders to stay in debt and pay the interest every month.

This is where it gets painful.

Draw up a budget. There are expenses that must be paid, no matter what. Housing, food, and transportation to and from work to name a few. People who wish to get out of debt need to ask themselves how much of their income is discretionary? Or in rather plain, realistic terms: how much money is spent every month on fun?

How much discretionary income - fun - can be put toward debt? For example, instead of eating lunch out at work everyday, brown bag it once or twice a week and put the cost of the restaurant meal toward the card payment. Dating can be planned for a frugal budget. Try renting a movie with someone you know well, instead of going to the theater. And put the money saved by staying home toward the credit card payment(s).

This advice is just the beginning of frugality. Some people choose to adopt a more frugal lifestyle for a temporary period of time to meet specific goals, such as paying down debt. Other people choose frugality as a permanent option for a variety of reasons, including not having to work as many hours or being able to afford a nice home.

For those interested in paying down debt, controlling spending, or adopting a more frugal lifestyle for any reason, there are forums and blogs such as The Simple Dollar, and books like The Tightwad Gazette. Good luck!

Learn more about this author, B. Taylor.
Click here to send this author comments or questions.