Paying Off Debt
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Paying off debt should be the first step in your debt reduction program. With this planned and in place you will be on your way to financial freedom and ridding yourself of undue financial stress.

If you are currently buried under a pile of debt you will be glad to know that beginning the process of reducing this debt burden and eventually getting rid of it altogether is a simple process that can be broken down in three essential steps.

First and foremost, you'll need to stop adding to your debt with credit cards and overspending right now. Next, you should establish a reserve and emergency fund, and finally you will need to begin the arduous process of paying down your debt.

Regardless of your overall financial situation, you can use these same techniques whether you have just a little debt or a huge pile to pay. Paying off debt needs to be a priority.

Stop Adding New Debt

This sounds like a very simple thing to do, but in reality it can be very difficult. As we set out our debt reduction programs and begin paying off debt, many of us simply overlook this step, partly out of a lack of awareness of how important it is, and partly because we are just plain overwhelmed.

Don't assume that you will never get out of debt. That kind of negativity will reinforce itself and stop you in your tracks. Paying off debt is something that you must commit to do.

Take these first steps today and simply stop using credit cards and loans for purchases. By continuing to use them you are adding to your overall debt and increasing the time it will take to reach a financially stress-free life. If you can't afford to buy something with cash you need to take a few minutes and decide if you really need it. I didn't say want it, I said need it. There is a huge difference between those two ideas.

If you are having difficulty stopping the use of credit cards you may have to resort to cutting them up. Try this for six months or so and see if you decide you just don’t need them. You cannot rationalize the need for a credit card when you can’t control its use. Debt reduction begins by taking this first step and being disciplined enough to stick with it.

Credit Card Myths Busted

Credit card companies want you to fall for these myths:

• You must have a credit card as a spending safety net.
• You can’t live without the convenience provide by having a credit card.
• A credit card can provide valuable cash back bonuses and other important perks.

Let's bust them.

You need a credit card as a spending safety net. Well, although it could come in handy for this, the reality is that you will likely begin to use it for far more than safety net spending. A better alternative is to have an emergency account funded to a level of your choosing in place and earning interest. If because of your current situation you don't have the financial capability to put an emergency account in place and you feel using a credit card is your only option, then at least, do not carry it with you on a daily basis or when you are out shopping.

You need credit cards because they are "more convenient" than cash. This truly is a myth today as debit cards are accepted just about anywhere you can use a credit card. You still have the option of using cash or a personal check in certain situations. Using a debit card instead of a credit card makes you think long and hard about spending the money in the first place and is just another reason not to have or carry a credit card.

Cash-back, mileage, or other bonuses make credit cards valuable. Actually, the only way you can make these bonuses worthwhile is if you are paying off debt every month, both on-time and in full. If you carry a balance on a bonus card you will invariably pay more in interest, fees, and other charges than you could ever hope to gain in benefit from the bonus. Instead of falling for these dubious bonus card benefits, forgo the credit card and reap your own benefits of having cash and not paying high interest rates, you will be far better off over the long haul.

Establish a Reserve Account

Having a reserve fund for emergencies and other extreme contingencies can help you avoid the use of high interest credit cards when those unexpected life events like an appliance failure, unforeseen auto repair, emergency medical bill or even a job loss get tossed your way.

Make sure you do not allow yourself or anyone else in your family to spend this money for anything other than a bonafide emergency. That means you never dip into this account to splurge on a luxury item, buy dinner out, or take a vacation. You and your family need to have a firm commitment and belief that this money is for absolute necessities only.

To start an emergency fund you should try to save at least 10% of your income initially. If you have the option, one of the easiest ways to do this is via a payroll deduction plan that diverts your money to some sort of interest bearing saving account. Remember this is money you may need to use on a moments notice so keep it in a safe place like a money market or interest bearing savings account. You shouldn’t be investing these funds in anything risky.

If you are really strapped with some large debt loads, you might not think you will be able to save anything. Still, it is a good idea to try and start this account even if you have to do it with small amounts of money. It will still be worthwhile and over time you will see that is was all worth the effort.

Rolling Debt Pay Off

Start paying off debt fast by rolling from one outstanding balance to the next as each reaches a zero balance. Decide how much you can afford to pay toward your debt balances each month and then start by paying the bill with the highest interest rate first. Of course, you will still have to continue to make at least minimum payments on any other outstanding balances. As you concentrate your debt reduction efforts on that single account you will see the outstanding balance fall fast. Once this one hits zero, move to the next one, except now you will have more money to throw at it since you have one less account to worry about. As time goes by and you continue to knock off one account at a time the debt reduction ball will start to roll even faster. The closer you get to being totally debt free the faster it will go.

A Few More Helpful Debt Reduction Tips

• Learn to be more frugal. Find ways to cut back on unnecessary spending so you will have more money to put toward savings and paying off debt.
• Use coupons for whenever they apply to a purchase you need. Don’t let yourself buy things you don’t need just because you have a coupon.
• Get rid of some clutter around the house by selling unneeded yet still valuable items. Consider a yard sale, garage sale, or selling some of your stuff on eBay or craigslist.
• Try to negotiate a lower interest rate on your credit card or revolving loan debt. You should also try to avoid late fees or other ridiculously expensive card charges.
• If you have a credit card that has gone over limit and the account is being hit with extra fees, call the credit card company and try to negotiate a fee waiver.
• Every one of us has some kind of luxury even if we are not wiling to admit it. Get serious about paying off debt by giving it up, at least temporarily.

If you put your mind to it and talk it out with your family you will undoubtedly be able to come up with even more great debt reduction ideas that you can take advantage of now.