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3 steps to attacking your debt

By Kemberley Washington ·
Thursday, February 7, 2013
Posted: 12 pm ET

At the beginning of every year, many people vow they will eliminate debt once and for all. While it is great to have a desire to get out of debt, it is even better to put some action behind your plan.

You had to study to obtain your college degree, and you exercised to lose a few pounds -- now, it will take a dedicated plan and discipline to attack your debt.

1. Make a plan

People frequently are unsuccessful in attacking debt because they do so without planning beforehand. So, the first step to attacking your debt is to establish a debt-reduction plan.

Begin by creating a list of every person you currently owe. Next to each creditor, record the account balance, interest rate and applicable due dates.

Once you have compiled your listing, determine how you will attack the debt. While many argue it is better to first pay off balances with higher interest rates, others say it may be wise to attack small balances -- regardless of interest rate -- to give you the extra motivation to attack other forms of debt.

Compare the pros and cons of each method and use the one that works best for you.

2. Budget well

Once you have defined your method, make a firm commitment. Review your monthly budget to identify funds available for paying down your debt.

This is why budgeting is so important. Not only can a budget help you gauge the amounts coming in or going out, but it also gives you a financial roadmap to take control of spending.

Once you have identified available funds in your budget, commit to applying the amount over and above the required minimum payments.

3. Just say 'no'

Saying no to new forms of debt -- no matter how big or small -- is also important when attacking debt. Resist the urge to make purchases using credit cards. It is also a good idea to remove credit cards from your wallet, so that you will not have the urge to use them.

Remove overdraft protection from your accounts. This will get you into the habit of using only the money you have available in your accounts to pay for expenses.

The key to attacking debt is establishing a purpose for every dollar that comes into your possession. Before spending your hard-earned money, put a plan in place to help you forgo unnecessary expenses and reduce frivolous spending. This will help you attack debt more quickly.

Remember: your choice, your future!

Kemberley Washington is a certified public accountant and business professor who writes a personal finance blog at Follow her on Twitter and on Facebook.

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Jeremy Hamilton
February 07, 2013 at 5:25 pm

Budgeting is a great way to attack debt. I would guess about 99% of people don't create a monthly budget.

You could also try consolidating your debt. That is a easy way to attack debt.

You gave some great advice in this blog. Thanks for sharing. I'll be sharing this post with our community.