Do You Need A Debt Reduction Program

Most of us (literally - it’s more than half of all Americans) are stuck in debt currently. Of those who are in debt, it’s usually due to overspending on credit cards (living beyond our means). When the debts start to pile up, people often start to look for a solution. What you need is a debt reduction program. I am going to give you the outline for it.

1) List out all of your debts. All of them. List them out to the penny. Write out how much they are, who you owe, what the minimum payment is, what the interest rate is, and anything else that’s relevant. The sad part about this is that most people find their debts are greater than they thought. That’s ok — starting right now we’re going to change that and get out of debt.

2) List all your regular expenses. Include your utilities, car payments, groceries, rent/mortgage, and everything else. You must include the minimum monthly payment that you must make on all your debts.

3) Determine your net monthly income. If you’re paid a salary, this is pretty easy — add up what you earn each month after taxes (or every two paychecks). If you’re an hourly worker or are largely paid on commission, be fair — but conservative — about your earnings. Also, if you have regular other income (alimony, child support, etc) include it.

4) Determine your disposable income. Total up your net (after tax) monthly income and subtract out your expenses. What’s left is your spending money and what you’re going to use to pay off your debt.

5) Create a program and stick to it. What you do with your disposable income is up to you. My guess is that you spend more each month than you have in disposable income — thus the debt. Put yourself on a budget. Cut back on the things you’d “like” to have and focus on the things you “have” to have until your debt is paid off. Once you do that, you will be on your way to financial freedom.

If you simply follow the five steps listed above, you are well on your way to financial freedom. These five steps are just the beginning though. An additional step in reducing your debt is becoming a student of debt reduction strategies. Look for blogs and websites that specialize in debt reduction and credit card debt. You may even consider joining a program (like those successful weight loss programs) that can help get you get of debt. Good programs will not affect your credit score (they may improve it) and will help you get out of debt faster than doing it on your own.

Michael M Thomas is an executive at a Fortune 500 company who paid off over $50,000 in credit card debt. You can learn how Mike did it by reading his blog. You can also sign up for his newsletter.

If you are serious about getting out of debt, you should consider a product like Debt Free in Three. Mike talks about Debt Free in Three on his blog.