A straightforward debt reduction method to assist you eliminate debt.
By: Ian Master, Current Not yet Rated

Debt Reduction seems to have become fashionable and its not considered a dirty word anymore. The economic slowdown and financial chaos and the resulting uncertainty created have probably been the most important factor in this change. Different circumstance gave rise to this change in attitude. For many it was not a choice, but simply imposed on them by losing their jobs or other situations, for others it was simply the impact of events that made them decide that debt reduction was the right thing to do. Below I give you a methodology that you can use to slowly reduce debt. While I do not pretend this method will work for everyone, it will at least give some a start. Seeking professional help is a good idea even if you choose to follow the process below. This will reduce the time and increase the amount of money you can save. In the end the big benefit of this process is reducing the stress in your life and achieving financial freedom. The cost of using a professional almost always pays itself by the benefits received.
The Process for Debt Reduction is as follows:
First you must get your debt organized and separate into three categories:
Mortgages – Mortgages are loans against real estate, usually your principle residence. This type of debt has two advantages it gives you tax deduction and you may be able to use it to retire more costly debt such as credit cards.
Installment Debt - This is debt that is paid at a fix rate for a set amount of time or months. This would include cars, bank loans and similar.
Revolving Debt – This is usually credit card debt or other similar debt that the interest is added to the outstanding balance every month. Paying the minimum balance each month does not do much in retiring the loan and it may take 8 to 12 years or longer to do so.. You interest is not fixed either, which means they can raise as they wish. As we seen this past year many credit card companies raised their effective rate as high as 30%, not including other charges that are imposed at their discretion. Debt Reduction naturally should address revolving debt, which is where individuals encounter their biggest problems.
• The first step, which seems the most obvious is to make a conscious decision to become debt free/ and make commitment to stick to your goal achieve it.
• Next you should determine the type of debt you have, outstanding balances and monthly minimum payments. I suggest building an Excel worksheet that has columns for type of debt, name of creditor, interest rate, outstanding balance, monthly minimum payment and any other information you deem necessary. Then add the two columns for outstanding balance and minimum payments, this will tell you how much you owe and how much you need to have available each month for the minimum payments.
• Prepare a budget. You now know how much you need to service your debt. The budget should include all other normal and necessary expenses including, rent (if any), utilities, insurance, food, clothing and anything else that is recurring.
• Test your budget for a period of three months and determine if any adjustment need to be made. When you have established that the budget is valid, then you can begin your debt reduction program.
• Any amount that is left over each month, dedicate to reducing debt. Concentrate on reducing higher interest rate debt such as credit card debt first. By paying something extra you monthly minimum payments are reduced and your budget surplus increases allowing for more debt reduction. This give you the ability to pay eliminate debt faster.
• Celebrate, that you have begun your journey to financial freedom. Treat yourself to something special, with no debt obviously.
• Go back to step 5 and repeat the process until you eliminated all debt. Repeating this cycle has the avalanche affect and before you know it you will have become debt free.
You may look at the above process and say to yourself that its not applicable in your case or numbers are not your thing. Don't lose hope and remain optimistic.. There are many cases in which the above is not workable or the situation seems very difficult. You only need professional advice from those that can help you eliminate debt. They will custom make a program that is right for you and help you achieve financial freedom.

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