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If you are one of the millions of people who have fallen into debt, there is hope. Admitting you are having a financial problem is the first step and often the most difficult. Once making the decision to start rising out of debt, watch out for common pitfalls.

First of all, strategize. Look at what you owe and what you expect to pay each month on rent or mortgage, bills, phone, Internet, etc. There are two types of debt. High interest loans, such as credit cards that deplete your credit score and rack up large amounts of interest, and low interest loans such as mortgages. As long as you are paying these payments on time, they can actually strengthen your credit by showing a zeroed balance at the end of the month. These loans also tend to charge less than half of the interest as credit card debt.

Instead of getting overwhelmed by trying to pay everything off at once, maintain payments on low interest loans, and increase payments to high interest debt. The extra money that you may have applied to your mortgage will whittle damaging debt down and save you a lot of money on interest rates.

If you have a lot of credit cards, apply the same strategy. Look at the interest rates on each card, and while still maintaining monthly minimum payments, apply the greater amount of money to high interest credit cards, paying those off first. If you are able, transfer all your balances to the lowest interest credit card and close the other accounts, of cut up the cards so you still maintain a zero balance.

As inviting as it is to cash in your retirement or stop putting money into your retirement account, don't do it. Cashing large amounts of money like that will leave you paying penalties and taxes at the end of the year. What money you would have set aside for retirement will not make as much difference as you think, and when you do retire you will have lost all interest that money may have accrued.

Another mistake people make when trying to pay off debt is that they stop saving money. They put every penny into making payments and get frustrated and hopeless. Even if you just put aside $20 - $30 a month, save something so you will be able to see the light at the end of the tunnel.

As always, when paying debt, stick to a strict budget. Debt management can be an overwhelming process, but if you make a plan of attack and stick to it, you will begin to see your mountain of bills begin to shrink.

Learn more about this author, Molly Carter.
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