So Much Month, So Little Money

In recent months, economists have predicted doom and gloom equating that of the 1920's “great depression,” and rightly so. Consumers are weighed down by more credit card debt, looming foreclosures, and overdue bills every day, progressively eating away at their savings – if they even had any. Average U.S. consumer savings is actually in the negative. People have become too concerned with buying, and too unconcerned with saving, hence the financial pot hole we're standing in today. There has also been a significant lack in education on personal finance. For example, if you didn't know paying the minimum on your credit card every month actually doubles your debt in most cases, it would seem like a good idea, right? Too many people just don't know how they are getting themselves into trouble, and when or how to start digging themselves out.

Video: Secrets to Successful Budgeting

You Know You're In Deep When...

Generally speaking, if you can't pay all of your credit and debts in one year (excluding your student loans, mortgage, and auto loan), then you have too much debt. If you're getting close, or worried that you might get in over your head, the first thing you should do is make a budget. Yes you've heard it a million times – but if everyone is talking about it, maybe, just maybe, budgeting is a good idea. The keys to good budgeting are first, making the plan, then tracking expenses, having a goal, and if you need advice, getting it.

Developing Your Debt Freedom Plan

List everything you pay each month – total amount you owe, interest rates, bills, and other expenses. Definitely include some kind of a “just in case” savings and a little extra for luxuries like eating out and entertainment (you can't reasonably expect to live without a little fun here and there), and don't forget little things like dry cleaning. Next, call your creditors to see about lower rates, and then prioritize your debts according to cost – pay off or move the high-interest loans first. Once you have reached this point, go ahead with your plan so far, making sure to track every dollar you spend and pay everything on time. Making your payments on time has two beneficial side-effects. Not only will you get the great payment history you need to improve your credit score so you can negotiate lower rates later on, but it will also help avoid those pesky late fees and punitive interest rates, helping to keep your overall debt lower today and in the long run.

Video: Solutions to the Debt Trap

Finishing Touches for Debt Freedom

Stick to your budget until it starts becoming unreasonable, or one year at most. At that point, you should re-evaluate everything again, and refinance your mortgage to get a better rate (you should also save some money to buy points, since this will decrease your interest rate even further). If you ever get stuck with any of this, just look for a non-profit credit counseling agency for free advice on budgeting, credit repair, and debt management . Friendly professional help is just a phone call away!