With a little proper planning and work you can make a huge difference in debt reduction.  Yes, Gertrude, many people do start to reduce their debt all on their own, and come out on the other side freer, happier, and, of course, with a lot more money to jingle.  While many times it is prudent to hire a debt reduction specialist, there are some things that you can do on your own that will start the financial ball rolling in your direction.

Take The Bull By The Dollar Signs

Start by taking a frank look at your debt.  Haul out every bit of paperwork related to your finances.  Go to the online credit reporting agencies, and get a copy of your latest credit report.  It’s perfectly alright to be a little bit scared during this step, but remember that you also run the risk of being pleasantly surprised.  Now that you have your paperwork and credit reports, grab a notepad and a pencil.  Write down the interest rates you are currently paying, the balances that you owe for each interest rate, and make a list of the payments that you make on a monthly basis.  Be sure this list includes all outstanding loans, and debts, and don’t forget about those student loans.  Debt consolidation is a step-by-step process, so be sure that your figures are accurate, and that your debt reduction goals are clearly defined.

Analyze Your Current Situation

After you have all of the above in place, look at your current personal financial picture.  It’s time to make use of that notepad and pencil again.  Remember, the goal here is debt reduction.  Jot downs your monthly after-taxes income.  Be sure to include income from any part-time or freelance work that you can count as incoming cash flow.  Now, jot down your outgoing money.  It’s easy to forget about things in this step so be detail oriented.  Be sure to include babysitting or childcare expenses, on-going medical expenses, like prescription drugs, food, lights, water, phone, cell phone bill . . . any bill that you pay on a monthly or quarterly basis (like car insurance).  Now that you have a good idea where you stand financially, take the total from the incoming and subtract the total from the outgoing. Do they balance?  Is the outgoing total higher than the incoming total?  If so, a debt consolidation program may very well be just what the doctor ordered for your financial health.

Planning Ahead

Not planning ahead causes financial trauma that could otherwise be avoided.  Now that you’ve done the math and have the figures in front of you, what’s the next step?

The next step is to make a plan of action that you can live with.  If you run short of money each month, look for things that you can do without to make up the deficit.  Although you hate to even think about it, cutting out the movie channel subscriptions on your cable will save you a whole chunk of change right there.  You may also benefit from debit counseling.  This may provide you some unique insights on how to help cut your bills and either save money, or use the extra money to lower your bills.  Debt reduction can be fun and profitable when you do it the homegrown way.