With the looming financial threats of job loss, income reduction, and a recession, it makes sense that most people have made credit card debt reduction a priority. And it should very well be a priority. After all, this type of debt normally carries the largest costs in terms of interest rates. As well, given the rising rates, credit card debt reduction is one thing we all need to look at more closely if we want to not only weather this economic storm, but to make ourselves financially better off.

In terms of interest rates, the trend has been that they are rising. Considering that back in May 2009 the average card rate was 13.94% and today is a full 1% higher, credit card debt reduction is something that can easily curtail the amount of money we spend on our debt.

Rising rates are not the only reason people should concern themselves with credit card debt repayment. Let’s look at credit scores. With revolving credit, people are more apt to see their scores tank because more than 65% of their FICO score is based on two major factors: utilization and repayment history.

Borrowers who do not make credit card debt reduction a priority will normally encounter problems when there is a personal financial setback, such as a reduction in income. When the balance hovers at or near (or even above) the card limit, borrowers will be penalized through their score for having high utilization. To compound matters, if the financial setback is a bad enough and a single minimum payment is missed, the score will suffer even more on account of late payments.

Negative scenarios like these are never fun to explore. Still, we need to hedge ourselves against the three negative economic facts that are going on right now. Again, they are: card rates are increasing; the economy is tough right now and the end point has not been clearly set and; credit scores are more and more important to the lenders we want get credit from. Without question, we need to put a plan for credit card debt reduction in place sooner rather than later.

It is amazing to hear some of the different reasons people have for carrying a certain amount of debt. And there are as many different reasons as there are to make-money-quick schemes. However, we all share one universal care when it comes to financial well-being and that is how to achieve it. Credit card debt reduction is one such way. And with things the way they are now, it makes much more sense to tackle such debt now before it is too late.

It is rare that you will come across someone who actually loves the pressure of carrying personal debt. Whether this amount is $2,000 for Jenny or $50,000 for Teddy, the amount isn’t as important as the fact that it is debt. Eventually, whether you are more like Jenny or more like Teddy, you will decide it is time to take action and put together a debt repayment program. Here are the three D’s of debt repayment that can help put a successful plan in place.

1. Determine. The first thing you will need to do is determine two things as they relate to your debt repayment program. The first is how much you can afford to repay on a monthly basis. You can realize this through the dreaded budgeting process. The second thing you need to determine is which debt needs priority and what debt can be less of a priority. You will normally base this determination on rate, but it could also be based on cash flow.

2. Devise. With this second “D” you devise the actual debt repayment program. During the devise stage, it is wise to plot your projected monthly progress over the course of several months. This is especially important when you have a large debt balance to repay or if you are unable to make substantial monthly payments toward your debt repayment program. By plotting it out over the course of several months or an entire year, you are better able to monitor the progress over the long haul as month-to-month progress will typically be slow.

3. Discipline. Arguably the most important D of all of them is discipline. When it comes to a debt repayment program (or any program for that matter) discipline is required in order to ensure the plan is followed through to the end. With debt, this means chugging along at a regular pace with your repayment amount and not touching available, revolving credit. It means being disciplined to review your accounts on a regular basis and tracking your progress against your plan.

Putting together a debt repayment program does not need to be a painful experience. In fact, the process should be an educational one that might even help keep you on track. Keep in mind that the three D’s above are the foundation to a successful plan and you will find success in repaying your debt.

We all know that simpler does not always equal better, and this could not be more than when it comes to debt consolidation. However, it sometimes makes sense to sacrifice some shorter-term prospects in order to gain in the long term. To explain this statement further, we will examine the top reasons to consolidate debt and show just how some of the disadvantages “now” can translate into financial gain “later.”

Simplification

Perhaps the one of the top reasons to consolidate debt has to do with simplicity. By amalgamating all debt into a single loan or product, you can simplify your regular debt repayment program by reducing payments from x-per month to one single payment. But…

The largest pitfall with simplicity is that it normally comes at a cost. This can mean higher interest rates or it can mean reduced accessibility to credit when your surrender your existing credit in order to obtain the consolidation loan. Why is this such a big deal? With revolving credit, you can use available credit to fund emergencies. By giving it up, you are giving up that peace of mind. As such, simplicity as one of the top reasons to consolidate debt might not seem like such a great benefit after all.

Paid In Full At The End of Term

Since most consolidation loans are approved on a term-loan basis, the debt you consolidate will be retired by the end of the loan’s term. As such, this is definitely one of the top reasons to consolidate debt, particularly for folks who have a tough time paying down balances on credit cards and/or lines of credit.

Stronger Future Cash Flow

While improving cash flow was noted earlier (under simplicity) as one of the top reasons to consolidate date, increasing future cash flow is also an often overlooked top reason. What this means is that if you have sacrifice, say, monthly savings of $200 toward retirement so that you can repay a loan of $400 per month, you will quite likely still improve your future cash flow. The reason for this is simple. Instead of saving for the next twenty years, you could repay debt in the next five. But in five years with all of the debt repaid and $400 extra dollars at your disposal, you would only have to save $340 of the available $400 to arrive at the same financial milestone you would reach if you continue saving $200 today. That would leave an extra $60 to improve cash flow or, better yet, give your retirement savings a nice little boost

Naturally the three reasons above are just some of the top reasons to consolidate debt. Again, they are simplification of current cash flow, a guaranteed repayment of debt at the end of the loan term and a likely improvement to future cash flow and savings. There are some sacrifices to consolidating debt, though. Normally, this includes higher interest rates and a sacrifice of flexibility in terms of credit availability. Borrowers should always make sure they understand the terms of their consolidation loans and be 100% certain that it is the right financial move before signing on the dotted line.

There are times when just meeting your financial needs will leave you with a tremendous amount of debt. When it comes to repaying debt and properly managing your finances, you have plenty of options available to you. The best way to repay debt involves focusing almost exclusively on higher-rate debt and gradually working your way to lower-rate debts. Keep in mind that all debt need to be paid, but keeping the lower-rate debt to the minimum amount and channeling remaining funds to the higher-rate debts will help you get out of debt quicker.

Start by listing all of your debts, including creditor name, amounts, interest rate, and the minimum amount due. It works best when you list them in descending order, starting with the higher rate debt first, and ending with the lowest-rate debt. This way, you know at a glance just how much you need to pay to each creditor and which should be your primary, secondary, etc., focus.

With the completed list before you, determine how much you need to repay to all of your debt on a monthly basis. This means adding up the “monthly minimum due” column. Balance this amount against the funds you have available each month to pay toward your debt. Hopefully, you still have money left over. This amount should then be allocated to the top creditor (i.e. the one that charges you the highest rate). It makes no sense to spread out this extra amount - direct this extra money to your top priority.

An essential element to successful financial planning includes establishing a savings account. When you have debt, however, savings should be moderate with the primary focus being repaying that debt. However, savings of even $10 per paycheck will accumulate rather quickly if left untouched, and this is extremely helpful when it comes to making a lump-sum payment against your debt. Alternately, you can discipline yourself to spend only what you have saved in this modest savings account when you have an urge to splurge.

One option that you should not dismiss is borrowing from friends and, more likely, family to repay higher-rate debt. Typically, family will not charge 19% interest on the money they lend. In fact, they often lend at zero-interest, which means that you will be far more effective in repaying family than you are in repaying credit debt. If your family has the means to lend the money, consider it carefully in order to get ahead financially.

If you have large amounts due, your progress will be much slower. Keep this mind when tackling such amounts as it can get discouraging after a few months of seeing little progress. Once you start clearing your debt, you will start seeing improvements to your personal finances almost immediately and, within months, even your credit score.

Debtors who want to determine whether debt consolidation makes sense should consider a couple of things. Ideally, both considerations will lead to improving the financial well-being of the debtor. With an improvement to personal finances as the ultimate objective, deciding whether debt consolidation makes sense becomes a much easier task.

The first is whether a debtor can and should use the equity in their home to pay out their consumer debt. Although this was the topic of a recent article, borrowers should always use their equity if it means improving their financial wherewithall. The reason? Cutting total interest costs paid to lenders and improving monthly cashflow for the household.

In this case, whether debt consolidation makes sense will depend on how the debtor can curtail (or ideally eliminate) future consumer debt. Debtors who simply rack up more and more in consumer debt following a debt consolidation will simply erode their net worth on a continual basis and, truthfully, their problem is not a debt problem, it is a spending problem.

The second option facing debtors will be the issue of an unsecured debt consolidation loan. Where consolidation loans secured by home equity will normally result in lower rates, unsecured consolidation loans may not. Therefore, debtors with only this option available to them will aim at improving cashflow and not necessarily total interest costs.

When cash flow becomes the only factor, determining whether debt consolidation makes sense is a very simple task. All debtors need to do is add up their current bill payments and compare it to the payment on the new consolidation loan. If the new loan payment is lower, than cash flow has improved. In cases where cash flow has improved, debtors should then determine whether it is sufficient to keep them afloat. If not, other options need to be explored.

Evidently, debt consolidation through home equity makes the most sense when consider both cash flow and total interest costs. When this is not an available option, borrowers need to decide whether debt consolidation makes sense through an unsecured loan. Often, only cash flow will come into question as rates will typically be higher. Options are available through specialized lenders, however (see below) where rates are usually lower than typical unsecured loans.

So many people cite personal finance problems as a leading cause of divorce and long-term, debilitating stress that it is rather surprising so few products are available that help people manage this important aspect of life. As well, given the severity of such problems, it stands to reason that dealing with financial problems needs to be done effectively. This will not only allow you to improve your own, financial and mental health, but will allow you to avoid dealing with difficult debt collectors.

The best way to get started with dealing with debt is to calculate your total debt levels. You can do this by organizing unpaid bills and debt from the lowest amount due to the largest. Next, decide the amount that you can repay every month. To come up with this number, you will need to complete a fairly elaborate budget. For a more complete plan, prioritize your debt based on the interest rates your creditors charge - with higher-rate debt being a higher priority than lower-rate debt.

Certain debts that need to be paid immediately should take immediate priority. Past due rent and mortgage payments fall into this category because if they remain unpaid, you can suffer serious and severe consequences. Make sure these debts are paid first and leave your credit cards, past due loans, etc., for a following month if necessary. In cases where there is no possibility that you can repay all of your debt, consider putting it off until a detailed budget has been completed in the next step.

With the high priority, immediate debt dealt with, the sense of urgency will dissipate. This means you can start dealing with debt with a greater focus to detail, particularly when it comes to refining your monthly budget. This often-boring process will not simply measure your monthly expenses, but it will allow you to see what is left at the end of each month, which you can dedicate to a more consistent debt repayment program. A huge advantage with a budget is that it highlights areas where you can make deeper cuts to your monthly expenses, allowing you save even more money.

In the event that you are seriously past due, you will want to connect with your creditors. Now that you have completed a full budget, you know better how much you can afford to repay each month. This will allow you have a meaningful negotiation with your creditors. Dealing with debt this way means revealing as much as possible to your creditors about your financial situation. If you are not comfortable discussing these details over the phone, you can write a letter.

Now that lenders are taking a bit of heat about responsible lending practices, nearly all of them offer third-party services to people who are having a tough time dealing with debt. These no-cost services will offer tips and knowledge about how to remedy your debt situation and regain control of your personal finances. If you are having problems surviving from month to month or if you are stressed to the max about whether you can overcome your debt, you should consider taking advantage of such programs.

These are some of the most general ways for dealing with debt and handling personal finances. Of course, every situation is unique, making it difficult to make generalized recommendation. One recommendation includes visiting sites like Help Fix My Finances.com to work through an unique financial plan.

There are several reasons why you must avoid bankruptcy at all costs. In the first instance, it may look like the best solution, as it offers a clean state, freeing one from all the debts that one owes to various creditors and that were almost impossible to pay off otherwise. Still, it is not the right solution because you may get instant relief because of this but in the long run it will make your financial life terrible. You can realize the severity of the consequences with the very fact that it may even affect your future employment. That is the reason why you should do everything that you can to avoid bankruptcy.

Following is a brief rundown on how to go about it.

Analyze the true status of your debt load.

The first thing that you have to do is to total all your debts. You must have complete knowledge about the total amount of money you have to repay to your creditors. You can do this by gathering all the documents that are affecting your financial situation in one way or the other, including all the bills and statements. Here, it is important for you to understand that your mortgage is a debt for you, but the value of your home is an asset.

Healthy versus unhealthy debt.

In conjunction with the above, wherever you have an offsetting asset you can categorize the debt as “healthy.” Some examples of “unhealthy” debts include medical bills, car loans that exceed the market value of your vehicle, and credit cards.

Create an income statement

This step involves taking your total monthly income and subtracting all of your monthly expenses from this figure. If you still have money left, great. If not, consider areas that can be changed so that you have money left over. With this money, you can repay debt.

Spend Less And Earn More

Since you are in debt, you will need more money to repay the same. The only way to get that money is to increase your income and reduce expenses. When it comes to making a reduction in expenses, even saving a single dollar can make a big difference. If you seriously want to avoid bankruptcy, you should not lose any opportunity to save money - no matter how small it is. Such amounts when accumulated on an annual basis can take care of a good amount of your debt.

However, if you are in a deep trouble and are unable to think of a better alternative, you should consult a credit counselor. They are professionals that can tell you how to manage everything in an effective way in order to regain control of your finances and avoid bankruptcy. Another way to go about improving your finances would be to invest a small amount of money into a detailed e-book on the subject as well as personal finance programs that can help get your finances back on track. At less than $50, there are programs that are comprehensive enough to be well worth the investment.

There are several reasons why you must avoid bankruptcy at all costs. In the first instance, it may look like the best solution, as it offers a clean state, freeing one from all the debts that one owes to various creditors and that were almost impossible to pay off otherwise. Still, it is not the right solution because you may get instant relief because of this but in the long run it will make your financial life terrible. You can realize the severity of the consequences with the very fact that it may even affect your future employment. That is the reason why you should do everything that you can to avoid bankruptcy.

Following is a brief rundown on how to go about it.

Prepare a full snapshot of your debt load.

Since debt is what led you to consider bankruptcy as your only option, start there. Evaluate your debt situation by weighing the true costs, both in terms of monthly carrying costs and total debt. Period. Start with the very same bills and credit card statements and weigh them against any potential assets (e.g. a mortgage will often have real estate as an offsetting asset). What other assets can be liquidated to clear debts?

Healthy versus unhealthy debt.

In conjunction with the above, wherever you have an offsetting asset you can categorize the debt as “healthy.” Some examples of “unhealthy” debts include medical bills, car loans that exceed the market value of your vehicle, and credit cards.

Create a Budget

This step involves taking your total monthly income and subtracting all of your monthly expenses from this figure. If you still have money left, great. If not, consider areas that can be changed so that you have money left over. With this money, you can repay debt.

Spend Less And Earn More

Since you are in debt, you will need more money to repay the same. The only way to get that money is to increase your income and reduce expenses. When it comes to making a reduction in expenses, even saving a single dollar can make a big difference. If you seriously want to avoid bankruptcy, you should not lose any opportunity to save money - no matter how small it is. Such amounts when accumulated on an annual basis can take care of a good amount of your debt.

In instances where the debt load is financial insurmountable, as demonstrated and supported by the above exercises, the advice and assistance of a state-qualified credit counselor should be sought. Another alternative would be to invest a small amount into a detail-oriented e-book on the subject of personal finances as well as a series of software programs that can help guide you on your journey to fixing your finances. A comprehensive program should run you less than $50 and is well worth the investment.