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Experts agree that keeping track of your weight is a key ingredient to weight loss. Similarly, keeping track of your debt is one of the most critical steps in starting and maintaining a debt-reduction program. After all, if you don't know where you are - how will you know where you're going, and how far away you really are? Even if you're not looking to reduce your debt, it's advisable that you always know where you stand with your finances.

By keeping track of how much you owe, as well as your individual balances and interest rates for each loan, you can make informed decisions about debt reduction, including your optimized payment order. Just imagine how great it will feel when one of your cards is finally paid off! Although you may still have a long road ahead with debt elimination, tracking will allow you to experience these intermediate "victories" and adjust your plan as needed. It will also take the stress of now knowing how much you really owe off your shoulders and allow you to focus on what's really important - debt freedom.

By far, the easiest way to keep track of all your debts is to use a personal finance software, such as Quicken or Microsoft Money. Recent online upstarts, such as Mint, offer the same capabilities as Money/Quicken, but without the hefty price tag, and are a good alternative if you want a simple overview of your financial situation. The programs download all of your credit card transactions, and also keep track of your loans. Most software packages will even do this for you automatically, so that once you sit down to review your balances, they will be waiting and updated for you.

If you prefer a more simplistic approach, there is nothing better than Microsoft Excel, or one of its many spreadsheet equivalents. By entering your loan accounts in the first column, and the balances in columns two, three, and so on (one column for each time "period" - month, year, etc.), you can even create attractive charts in a snap and give your debt reduction plan a visual form.

A final point of advice - if you'd like to verify that you are tracking all of your debts, it is advisable to obtain a credit report. Credit reports are accessible once per year without charge from each of the three reporting agencies, and will list all of your current outstanding debts. In this way, you can be sure that you are indeed aware of all your debts and can make informed decisions.

Learn more about this author, Peter K.
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