Creating an Achievable Debt Plan

Before you create a detailed credit card debt plan, you need to review your options and determine the best course of action for your unique situation.

The first option is the do-it-yourself debt management plan. If you are able to make your debt payments each month, have good credit and earn enough to pay your bills and to pay more than the minimum payment on your debts, then this is the plan for you. This method generally takes the longest, but it is the least damaging to your credit score.

Debt consolidation - another option to consider debt consolidation. This can come in several forms. You can roll high interest credit cards into low interest credit cards, you can roll your credit card debt into a home equity loan, or you can hire a debt consolidation company to do the work for you. Debt consolidation is much more complicated than this simple example, so I'll make a separate lens on this topic, but for now just now that hiring a debt consolidation company can be pretty damaging to your credit score.

Finally, there is bankruptcy, which is usually a last resort for most people. You will either have all of your debt discharged (hard to qualify for), or you will be put on a court-ordered repayment plan. Either way, bankruptcy stays on your credit history for a long time and can keep you from qualifying for loans for many years.

Once you have determined that you can pay off your debt on your own, it's time to see where your money is going each month.

Your next step is to track your spending. Write down everything that you spend money on each month - carry a notebook around if you need to.

Then determine what you can realistically do without, and put the money you save on those things toward paying off your debt. Here are some items that often drain our budget:

Eating out: Whether you pick up fast food for lunch when you're working, or go out to eat with friends at a fancy restaurant once a week, this can really add up. Try taking your lunch to work (at least 3 or 4 days a week), and have dinner with your friends once or twice a month instead of once a week.

Vices: Cigarettes, lattes, and other things we buy as a matter of habit are good places to cut back. Quitting smoking is good for you anyway, and switching to regular coffee, made at home with some flavored creamer, can be much less expensive than premium coffee shops.

Entertainment: No one's saying that you have to sit at home and be bored all of the time. Just examine your entertainment budget and see if there are ways you could cut back. If you rent a lot of movies, for example, consider signing up for an unlimited plan.

These are just a few examples. The point is to find things that you spend money on that don't add value to your life and make adjustments. You may need to make some sacrifices, but they are just temporary. Once your debt is paid off, if you find you miss an activity, you can always add it back into your budget. Just don't get into debt again!

Getting out of debt is not fun. And it doesn't happen overnight either, unfortunately. But you didn't get into debt overnight, so it's not realistic to expect that you will get out of debt overnight either.

When you're trying to pay off debt, you can count on getting derailed once in a while. Things happen. You may have an unexpected car repair, you may have a medical emergency, or you may just overspend one month and go over your credit limit.

When you do get derailed, it's important to get back on track with your debt management plan as soon as possible.

I have written a couple of articles to help you stay on track and to help you stay motivated on your journey to living debt free:

How to Handle a Financial Setback
A Simple Exercise to Reduce Financial Anxiety
Motivational Movie - Debt Free at Last!