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. The big benefit comes from reducing the stress in your life and financial freedom. Using professional may have a cost, but the benefits derived are normally much greater thank try going at it alone.

The Debt Reduction process is as follows:
You need to first organize debt into three piles, which are::
Mortgages – This is the type of debt that is secured by your house. 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 This type of loan is payable for a fix number of months at a fixed interest rate. 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. This means that even if you are paying the minimum payment every month, it might take 8 to 12 years or longer to pay the debt off. 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.

• First part of the process is to make a personal commitment to debt reduction and that you will stick with it until its achieved.

• 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 already have the numbers for the amount you need to service your debt. This budget also includes, rent (if mortgage is not included above), utilities, insurance, food, clothes and other normal recurring monthly expenses.

• Test your budget for a period of time, 3 months is usually good to determine if it need to be tweaked. When you have established that the budget is valid, then you can begin your debt reduction program.

• With any excess money each month dedicate it to eliminating debt. If you can pay a little extra on each account, concentrating on reducing the most expensive or revolving debt first. As you pay of your debt the budget surplus becomes bigger each month and you monthly payments less. 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. This process has the snowball affect and repeating it will result you being debt free before you know it.

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 despair or lose hope. 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. Depending on your particular situation they will tailor a debt reduction plan for you and help you become debt free.. I still believe that it’s a eliminate debt.

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