A large number of people live from paycheck to paycheck and over 80% of them have debts in one form or another.  An increased number of families are taking on more debt that they can adequately handle.

The marketing efforts by corporations are so strong that people feel they have to own tangible and non tangible items to be satisfied. With these constant marketing campaigns to sell products individuals are influenced to live beyond their means.

Those who are deep in debt need to hit bottom before they become aware that they have a debt problem which they have accumulated over the years.  Most of the people appear to give up from the mounting debt build up.  That is why it is hard for them to make any progressive steps towards improving their debt holdings.

Like those in the Alcoholic Anonymous organization, the members must first recognize they have a problem and then take steps to overcome it. Similarly, the holders of excessive debt who cannot explain why or how they got into that predicament must do the same.  After the recognition stage they must be committed to getting out of debt and saving money.  They can obtain debt counseling and progressively they would get out of the debt problem.

This requires significant changes and short term sacrifices in what they should have or have not by applying strict discipline. This effort should not be seen as a challenge but as a responsibility and also as the possibility of the positive outcome that can be achieved when a series of progressive steps are taken. You should aim for small victories and along the way as these will become big winners in the end.

Commitment to make this change is a choice you have to make. Once committed to make this change it may not be as smooth as you may think but every success made is a sign that if you keep it up will produce positive results.

To get started, here are six steps for success to reduce your consumer debt:

  1. If you are over your head in debt by three times your monthly salary, cut your credit cards in small pieces, except one.  Write on it “for emergencies only” but do not keep it in your wallet or purse.
  2. List all your debts excluding your mortgage debt.  Put the smallest debt balance on top of the list. All debts should be listed with the higher debt at the top of the list. If debt balances have the same interest rate they are treated as being equal in standing. Pay off the lower debt balances first.  This will give you a sense of accomplishment and instill enthusiasm and positive achievement feelings.  Debts that are manageable, that is, the debts having the highest interest should be on top of the list regardless of the balance.
  3. Take aggressive steps to pay off your debt. In descending order, pay off your debts starting from the top of your list. Start with at least 10% of your minimum monthly balance.  The more you can pay the faster your debt will be reduced.  You must have strong discipline and commitment and be consistent so you can eliminate the debt fast.  As you pay off the top one on your list use the money you have saved to pay off the next one on the list and continue to do so until all are finally paid.
  4. Arrange with your bank to have an Automatic Payment Schedule. You must do this because you will never miss a payment and you will save on fees.
  5. Create an emergency fund with a $1000.  You will deposit $20.00 a week, every week for a whole year.  You will save this money by taking your lunch to work, making your own coffee, and eat out very seldom etc.  You could transfer a small amount to your saving account from your checking account weekly as well. Arrange with your bank to do this a couple days after your paycheck is deposited in your account.
  6. Arrange with your bank to pay your mortgage bi-weekly. By doing this you will pay off your mortgage about five years earlier than if you would continue paying monthly.

Once you have created an automatic financial system to reduce your debt you will feel better, less stressed and you will see your progress and will have the enthusiasm and commitment to continue.  You could be an inspiration to others and help them do the same to pay off their consumer debt.