Debt creeps up by stealth on people. Most people in debt are in denial about their problems, and try and carry on as though nothing was untoward, which is how they got into trouble in the first place. The first step to getting out of debt is facing the problem, hence it's a very good sign that you are reading this article.

Sit down in a quiet place with a pad of paper and a pen, and a cup of coffee (or something stronger). Write down every single debt you have, the amount owed, the interest rate and the minimum payments due on each. Don't leave anything out.

Once you have all the information, get a fresh piece of paper and order the the debts into a list, with the highest interest debts at the top. Next to each one, list the minimum payment. Add up all the minimum payments, and then add 10%. This total will be your monthly payment towards debt.

The plan will be to pay off the highest interest debt first. To do this, allocate minimum payments to all the debts, and add the extra money to the minimum payment for the highest paying debt. Because you are paying more than the minimum on the highest interest debt, this should reduce first. Once you have paid the first debt off, the money allocated to it should be added to the minimum payment for the next highest interest debt, while you continue to make minimum payments to all the other debts. When the second debt is paid, you add that payment to the minimum payment of the debt after that, and so on. The beauty of this system is that you will be paying out the same amount each month, even while you are cancelling debts as you go.

Next, make a list of your income and outgoings to work out what you have left at the end of the month. You need to free up enough to meet the monthly payment you have calculated above. Try everything you can to reduce your existing outgoings. It's worth visiting sites like MoneySavingExpert.com for tips on how to do this. This website also has active forums where you will get much needed psychological support in your quest to reduce spending. In addition, think about raising your income. Consider getting a second part-time job or taking on overtime. It will be incredibly hard work initially, but it will speed up debt reduction process. The more money you can allocate to debt reduction, the better. If you can raise cash by selling junk on Ebay, do so, and pay off some of the highest interest debt.

The theory behind the above debt reduction method is that it is easier to commit to paying a steady amount towards debt than to osscilate from month to month trying to pay it off on an ad hoc basis. Allow yourself a little celebration each time a debt is cancelled. Debt repayment is hard work and the more encouragement you can give yourself the better.

Learn more about this author, Bonita Pinto.
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