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Debt Reduction

Take this "3-step" life preserver and use it... and don't feel like you're alone

If you ever wanted to get financially ahead, if you've ever had an argument in your home over money, if you ever thought you were drowning in a sea of debt, take this "3-step" life preserver and use it... and don't feel like you're alone in a sinking boat.

In a recent site survey, 37% of the respondents asked for more information on debt reduction to break out of their credit nightmare. This article not only consolidates many of the resources written at this site concerning debt reduction, but offers link resources as well as more new information not seen here before. Here the are the three steps I see as necessary for debt reduction.

Step 1: Where Do You Stand Now?

The following two selections offer a good indication as to where you fit into the debt hopper compared to other consumers.

Knowing where you stand among your peers (or "keeping up with the Jones's") may be what got you into debt in the first place, but sometimes it helps to know your standing for that extra motivational shove all of us need from time to time.  

The first set of data represents the percent of income used within various expense categories. Though this article was written in 1999 and the figures have increased, the percentages are just about the same. All Homes income average in 1999 was $39,926.

  • Housing....................30.9
  • Transportation.............16.2
  • Food.......................12.0
  • Income Taxes...............8.1
  • Soc. Sec...................7.1
  • Pension...................4.6
  • Health Care................4.5
  • Entertainment..............4.3
  • Wearing Apparel............5.2
  • Gifts & Contributions......7.7
  • All Other
Bureau of Labor Statistics Consumer Expenditure Surveyformatted by Money Magazine (July 1999). The next set of data to answer "Who borrows?" and "How much?" It is from Money Magazine (July 1999, pg. 70) and displays the average balance on that item in July 1999.
  • Credit Card......$2,811
  • 1st Mortgage....$76,018
  • Car Loan/Lease..$11,206
  • Personal Loan....$13,657
  • Student Loan....$11,887
  • Installments....$10,682

Step 2: Budgeting

It all starts with a budget. In fact, Fellow Guide Deborah Fowles in an excellent article called Budgeting: The First Step in Financial Planning, argues:

"To those of you who think you know where your money goes without keeping detailed records, I issue this challenge: keep track of every cent you spend for one month. I promise you'll be surprised and perhaps shocked by how much some of your 'small' expenditures add up to."

I could not agree more. Finding occasionally wasted $100's is easy. It's the consistent $10 or $20 dribble that eventually drowns you because you never see it build into the $100 bills. If you really want to reduce your debt, making out and sticking to a budget is vital!

Step 3. Application

So now you know where you stand in the debt-scheme of things and you have the greatest budget in the world. How can you get out of debt?

I would start at the top of Topic Menu. There you will not only find seven articles which constitute the original premise of this site, but you will find the fastest way I know of to get completely out of debt. Although not of my own originality, they contain the same formula I have taught for years and now have people coming back time after time saying, "It's so simple and it works!"

But let's say you just want to reduce your debt, or you need supplemental articles to implement the fast debt elimination plan. At the above reference, Topic Menu, (and just past the first seven debt elimination articles) is a subtitle, Money Savers. The very first entry, Free Money Ideas, is an index to 15 pages of money saving ideas categorized by areas of your life (auto, bank, shopping, etc.). Below Free Money Ideas are an additional 14 articles I have written specifically on saving money in various facets of your life.

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