Step 1

Make a list of your monthly expenses and prioritize them by importance. Rent or mortgage should be at the top of the list. Soon after comes phone, cable, other utilities, car payment, insurance, etc. Be sure to include all necessities such as hair appointments, groceries, baby and pet supplies, child care, etc. Remember to list eating out, entertainment and other regular or occasional indulgences. To assure thorough results, add to your cumulative list over the course of a month. Be alert to where the money goes each day, adding to your list as you face an expenditure you may have previously forgotten.

Step 2

Be honest with yourself about which items you could live without. Divide your list into two: necessities and optional. Depending on your income, you may have to get tough with yourself here. Keep in mind that an austere approach may be needed for a while. When you have accomplished your debt-reduction goals, you can create a new, sensible budget.

Step 3

Now you are ready to determine the amount of money you can free up to help you get out of debt. Many have at least $100 that is spent frivolously each month.

Step 4

List each of your cards by interest rate, high to low. Call each credit card company to ask for a lower interest rate. Let them know that you are considering transferring your balance to another credit card company. Doing so may have some influence on getting a better rate if it is available.

Step 5

If you have not already done so, add up the total debt on all of the cards so you know what you owe. Some experts recommend that you cut up all of your cards except one that you save only for a dire emergency. If you are not recovering from obsessive spending, you could consider cutting up only a few and putting the rest in a drawer or other holding place you can lock. Some people discover they accumulated debt because they simply neglected to exercise the self-discipline they were born with.

Step 6

Apply for a low or zero interest card that you can use for balance transfers. Move as much debt to that new card as you can, starting with the highest interest card first.

Step 7

Each month, take the amount of cash you allotted in Step 3 above to pay down the credit card with the highest interest rate.

Step 8

Do you have a savings account in a bank that is not being used for ongoing expenses? Most financial experts recommend that you use that to pay down credit cards. Perhaps you are making a small percentage of interest on the savings. However, the interest you pay on the credit cards more than wipes out what you make from the savings. Personally, I would not recommend that you use all of your savings to help pay off credit cards unless your checking account always has a substantial surplus from one month to the next.

Step 9

Continue to pay the minimum amount on the lower interest cards while you apply as much money to the highest interest credit card as possible. When you pay off one card, continue to use extra money to pay off the card with the next highest interest rate. Put any holiday or birthday gifts onto the debt – any windfall of cash should be used toward elimination of your debt. Once the balance of any given credit card is reduced to zero, call the company to close the account so you are never tempted again to use that card again as very expensive cash.

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