Paying off debt can be overwhelming at first because of the amount of time it will take to become debt free.  It’s critical not to get discouraged at this early stage.  Here are 5 tips that can be applied to help consolidate and eliminate debt.

1. Calculate How Much Debt You Have

It’s time to get real with yourself.  You’ve put it off for long enough and now it’s time to figure out exactly where you stand.  We have provided a helpful calculator utility that will enable you to input all sources of debt (car loans, credit cards, student debt, IOU’s).  Once you have this filled out you are ready to begin.  Until you are willing to face your problem, it will continue to haunt you and destroy your piece of mind.

2. Stop Blaming Yourself

This is perhaps the most difficult, yet most important step.  It’s time to let go.  It’s natural after Step 1 to get distracted and start thinking about all the regretful decisions made that got you to this point.  STOP!  Blaming yourself is in no way productive and you can’t blame yourself into a solution.  The only thing that is required it to admit that you are responsible for your current predicament (i.e. level of debt), and you are responsible for getting yourself out of debt.

Many times people get stuck right at the beginning of this process because they spend their limited moment of clarity blaming themselves and not on fixing the problem.  Remember, blame is a secondary emotion and is always covering up for a deeper, more authentic emotion.  It’s time to replace this ugly, complicated emotion with a pure one: forgiveness.

3. Make a Debt Payoff Plan

There are a lot of things you can do at this point to massage the numbers.  DON’T.  We’ll come back to this, but for now it’s more important to develop a plan, then to optimize.  Plus, it’s important to measure how significant your actions are going to be, and to give yourself credit accordingly.  Remember, the emotional part of this is far more important than the financial part.

The debt payoff plan should consist of whatever extra money you can set aside in addition to all the monthly payments you are making currently.  Put this in the debt payoff calculator and see where you’re at.  This will report a date for being debt-free.  Take a note of this, because in the next step we’re going to bring that number down.

4. Get Your Credit Report

In Step 5 we’re going to focus on negotiation, and it’s critical to see what we are negotiating with.  The answer to that is hidden in your credit report.  There are 3 credit agencies and they will each provide a free credit report once a year.  Remember that pulling your own credit will not impact your credit score, so there is no good reason not to do this.  Before you do however, prepare yourself that you may not like what you see.  In your report there may be old debts, late payments, co-signed loans gone unpaid, and fraud.  Read Step 2 again.  This is not a time for blame, this is a time for massive action.  You’ll be able to forgive the old You if the new You is headed down the right path.

We are looking for exactly 2 things in the credit report: how good is your credit, and are there any actions that can be taken to improve your credit.  Having average or good credit means you can do things like apply for a credit card with 0% balance transfer.  Having below average or poor credit means there are probably some items that need attention and can dealt with in order to improve your creditworthiness.

5. Take a Single Action

You know that saying ‘A journey of a thousand miles begins with a single step’?  There is no place where this is more true than when you are standing in front of the thing that scares you the most.  Remember, it’s OK to be scared.  It’s OK to be angry.  It’s OK to be tired of this.  It’s not OK to blame yourself anymore and it’s not OK to allow others to blame you.  Time to move on and open a new chapter in life.  Find a small forward action, and do it.  Now.  Here are some suggestions:

• Go to annualcreditreport.com and get your credit report.  Remember, it doesn’t impact your credit score if you are the one pulling your own credit.  There are 3 credit reporting institutions: Experian, Equifax, and TransUnion.  You can get your credit report for free, once a year, from each institution.  I recommend starting with just one of them (doesn’t matter which credit reporting institution so pick the one with the logo you like best).  Starting with only 1 will keep you from getting overwhelmed, and usually (though not always) they have the same information in each.
• If there is a blemish in the credit report that you didn’t make, email them and tell them to provide you proof or remove it from your credit report.  Tell them they have 14 days.
• If your credit looks OK and you are sure you wont abuse a new card, consider applying for a 0% balance transfer card and move your high balance cards over.  Note that when you do this, the money you save (as calculated in Step 3) MUST go right back into paying off the debt faster.  This money doesn’t go into your pocket.  WARNING: if all the credit cards you have are close to maxed out, this is a sign that you should NOT apply for another card.  No need for blame; lets just call a spade a spade.  For more information on this read Should I Transfer My Credit Card Balances: Benefits and Risks.
• If your credit is below average, pick the card with the highest APR, find the phone number, call them (anytime day or night just to get into the practice), and tell them you are looking to pay down your debt and would like a lower APR.  If they say yes, then take the savings and use it to pay down the debt faster.  If they say no, be extremely proud of the fact that you are taking action, irregardless of how the rest of the world reacts.
• If you have late fees or an annual fee on a credit card, call them and ask to have the fee removed.  Inform that it wont happen again, and you’d like to continue the positive working relationship.  Just like in the last bullet: If they say yes, then take the savings and use it to pay down the debt faster.  If they say no, give yourself credit for doing everything you could.

To summarize: stop blaming, get real, take action.  Good luck and if this approach helps in any way feel free to leave a comment.