The never ending accumulation of more debt and the habit of spending more that what you make will make it close to impossible to get rid of debt. It is of vital to understand that you have to do everything in your power to start living within your means. With conviction and self-discipline to control your spending and stop accumulating more debt, you are well on your way to living a debt free life.

Your first step in an effective debt elimination plan is to asses your financial situation. How you can save and which of your debts should be eliminated firs.

Listed below are the steps you should follow in order to make your goal achievable:

1.  Create a Budget

Start off with making a list of your income and your past expenditures. With this list, you can easily identify expenses you have made in the past that you can actually live without and expenses that can be considered quite extravagant or frivolous. It also gives you the opportunity to see which areas you can easily make small savings from.

After thoroughly examining your past spending habits, you can now make a revised budget wherein you cut all unnecessary expenses and channel the money you make in a month towards spending only for necessities and paying off a bulk of your debts.
This revised budget will be to no avail if you do not stick to it as meticulously as possible. A mere detour on this budget can result to a knock-on affect that will lead you even deeper into debt.

2. Go to your creditors and negotiate the interest rates of your credit cards.

The best way to make your monthly debt payments more affordable is to acquire lower interest rates. You will not be approved for a lower interest if you do not ask for one. Although not all creditors will approve your request, some will be more than willing to help you out just so you can continue paying what is due them. They give considerations especially to clients who have been consistent in debt payments and those who have had an account with them for quite some time.

3. Try to consolidate credit card debt with higher interest rates to credit card accounts with lower interest.

This will prove as a very viable solution especially for those with a number of credit cards to their names and with very high account balances. There are many balance transfer offers that have as low as zero interest rates for a fixed period. Take advantage of these offers.

4. Prioritize paying off credit card debt that has the highest interest rates.

Try to pay off debt that has the highest interest rates quickly and gradually work your way down to debts that have lower interests. It is highly advisable that you immediately close the credit card account once you have completely paid it off in order to eliminate the temptation of using it again.

In conclusion, in order to be successful with a debt elimination plan, it is required that you have a strong will and determination to follow through. It may even mean that you have to have a significant change in lifestyle for the time being but the end goal of being debt free is certainly worth the effort and sacrifices.

I am neither advocating nor panning debt consolidation loans here. But before you get a debt consolidation loan in order to alleviate your financial woes, you do need to fully understand what you are doing, why you are doing it, what the cost could be, and if it will, in fact, solve your debt elimination problems.

The equity in a home is usually the largest single asset that a family has. Equity is made up of the down payment that was made when the home was purchased, the amount of the principle of the loan that has been paid off, and any increase in the value of the home over the years.

Home loans, including second mortgages, are secured debt. The home is the collateral for the loan. If you default on your mortgage payments, you can lose your home. That’s the way it works.  And instead of having debt elimination, you have no home!

When you take out a consolidation loan in the form of a second mortgage, you are very literally betting the farm (the house) that you can make the payments each and every month in full and on time. There is more. Unsecured debt is debt for which you have not pledged any collateral — think credit card debt. When you charge a purchase to a credit card, you have not used any of your assets as collateral for that loan. And credit card purchases ARE loans. If you pay off your credit cards with your home consolidation loan, you are making your credit card debt secured which is not a good thing.