Steps to Pay Off Debt

Shopping with credit cards can make it too easy to live beyond your means.

Shopping with credit cards can make it too easy to live beyond your means.

Whether you attribute the source of your personal budget deficit to student loans, wedding expenses, a mortgage or just impulsive shopping, the need for a plan to pay off debt is often born out of desperation. By exercising the discipline to stick with a daily, weekly and monthly regimen of reducing debt, you'll not only feel less stressed about your present finances but develop healthy spending habits for the future as well.

Debt Assessment

Analyze and categorize all of the debts you currently owe as well as how much you are paying every month toward each one. This list should include rent/mortgage payments, loans, car payments, insurance, health premiums and revolving credit accounts. Identify which debts are fixed rates versus which ones are variable. Credit cards, for example, are variable because the minimum monthly payments fluctuate depending on your balance. Make a list of all income sources as well as your monthly expenses for food, utilities and gasoline. Subtract your total expenses from your total income to determine how much expendable income is available to put toward debt reduction.


Identify which debts you want -- or need -- to pay off first. Jerrold Mundis, author of "How to Get Out of Debt, Stay Out of Debt, and Live Prosperously," recommends that you either attack the debt carrying the highest interest rate or the one that can be paid off the fastest. If the first option isn't comfortably feasible, the psychology of the second choice yields a sense of progress. Once paid off, the amount that was put toward that bill each month is then rolled over to attack the next debt on your list. Mundis also advises obtaining a copy of your credit report from Experian, EquiFax or TransUnion to ensure there are no errors on your record.

Reducing Expenditures

As much as you may love those 200-plus channels of cable, fancy lattes every weekday morning and restaurant lunches, you may not really need them to feel content, especially if you're trying to work your way toward debt-free living. Embrace the mindset of asking yourself whether your purchases are actually necessary to your well-being or just a habit or whim. If necessary, keep a weekly log to track where your money is going and whether there are patterns such as stress, loneliness or peer pressures that seem to make you more vulnerable to careless spending. Purchase generic brands, shop seasonal sales, and learn to do some of your own repairs, says Ted Carroll, author of "Live Debt-Free: How to Quickly Pay Off Your Credit Cards, Personal Loans, and Mortgages -- and Build Real Wealth Today."

Renegotiate Terms

Creditors understand that everyone is susceptible to financial hiccups. The worst thing you can do, though, is to leave them in the dark about your situation, says Liz Pulliam Weston, author of "Deal with Your Debt: The Right Way to Manage Your Bills and Pay Off What You Owe." Communicate what 's going on if it is becoming difficult to make your payments. It may be possible to renegotiate your revolving credit terms in exchange for putting your cards on ice until your account has been brought current. Contrary to beliefs that quitting cold turkey on credit cards or canceling them will improve your score, Mundis advises continuing to use them for small purchases and maintaining a conscientious pattern of paying them down each month.

About the Author

Ghostwriter and film consultant Christina Hamlett has written professionally since 1970. Her credits include many books, plays, optioned features, articles and interviews. Publishers include HarperCollins, Michael Wiese Productions, "PLAYS," "Writer's Digest" and "The Writer." She holds a B.A. in communications (emphasis on audience analysis and message design) from California State University, Sacramento. She also travels extensively and is a gourmet chef.

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