Credit Card Debt is something that should be avoided at all costs, in fact, it is one of the worst kind of debts you can have. Why? well, quite simply, its because of the high interest rates that people generally pay on their credit cards. Credit Cards make spending too easy, don't get me wrong though, I think credit cards are good things as long as their use is kept in check. Credit Cards can be used to increase your credit rating, and they are great for getting out of emergencies, BUT there is a catch, they are only good if they are used responsibly. The only time that I feel a credit card should be used when it is an not an emergency situation (for example, an unexpected car repair) is when you know that you will be able to pay it off completely before the next bill is due. You should strive to never have any carry over from one bill to the next. This means that you will not be paying any interest on your purchases.

How do you get there, if you already have a large balance? Most people or articles will tell you, the first thing you need to do is cut up all your credit cards, so that you wont be tempted to use them again. I agree mostly with this statement, but I like to say cut up all credit cards EXCEPT one. This one card is your emergency card. Needing that new pair of shoes or that new power tool is NOT an emergency. Your car breaking down, or an unexpected house repair IS an emergency. Once you have chosen the card to keep, and cut up the others, you need to find a safe spot in your house to keep this card. It is not a good idea to be carrying it around with you in your wallet or purse, this small step will help to reduce the desire to use it.

Now its time to clean up the pile of shredded credit cards and tears, and get ready for the next step. Debt Consolidation. Are you still with me? good, it may sound scary, but it is actually a very simple and elegant solution to reducing your monthly costs. All that debt consolidation means, is to round up all of your credit card balances, and combine them into a lower interest loan or line of credit. You will be very surprised at the difference a lower interest rate will make to your monthly expenses. You may be reading this and thinking that there is no way you'll be eligible to get a loan for the amount you need to consolidate all your debts. Most banks, are actually very helpful in this situation, they want your business, if you go in and tell them that you want to consolidate your debts, they will try their hardest to help you get that loan. Not only will they try their best to get you your loan, they will give you more pointers on how to achieve this goal. Sometimes the rate that a bank will offer you is not as good as it could be, its always best to shop around, and try different banks and debt specialists to find the lowest interest rate you can get. But, as a rule of thumb, I like to say that if you can get less then half of your current credit card interest rate, you'll be in a much better situation then where you are now.

So, you've cut up your credit cards, (you have right?), and you've consolidated your debts. Now what? well, its not over, that's for sure, that was the easy part. At this point we want to take a good long look at your financial priorities, and how you should spend your paycheck. To do this, its helpful to write down all of your monthly expenses. Once this is done, you'll have an idea of how much of the money you bring in is left over. Not much is there? Its very surprising to find out how much 'spending' money you actually have once you take into consideration your rent/mortgage, food, utilities, automobile/insurance, cell phone and any other bills you have. from this spending money, we want to put as much as possible into paying off that new consolidated loan. If you have multiple debts you need to pay off, once all the minimum payments have been met, you need to concentrate on the debt that has the HIGHEST rate of interest. By doing this you are saving yourself the maximum amount of interest payments over the long run. Once all of your expenses are calculated, I would recommend taking all but $50 of the amount left over and put it towards paying off your debts. This gives you a $50 "allowance", that you have for spending, you have to make sure that you DO NOT go over this amount. The best way to make sure you'll follow this rule, is to set up an automatic bill payment with your bank. that way the money automatically comes out of your account, and doesn't give you a chance to spend it elsewhere. By doing this you are forcing yourself to pay off your debts, before any other temptations arise.

This cut in your spending money might be a big difference in your life, but if you really are serious about getting out of debt, this is what you have to do. Remember, your number one priority, after food and shelter, is paying off that debt. You are just throwing away your money every time you have to pay interest. If you follow these tips you should be starting on the right path towards removing your debt, what this means is that it's time to make sure you don't get into the same situation again. We need to stop this at the source, your spending habits. Please read my article on changing your spending habits to learn more about this topic.

Remember, even if you think it is impossible, you CAN change your current situation for the better. The first step is the hardest, so get it over with and start the path to an improved life.