How to Set Up a DIY Debt Reduction Plan

Before you sign on with a debt management company, you may want to consider giving do-it-yourself debt reduction instead. You will have more control over your finances if you do, and you can make adjustments as you go. Setting up a DIY debt reduction program is simple, yet painful if you are behind in your bills. If you are barely scraping by, you may find a DIY debt reduction plan the key to finding more money in your life by clearing off debt faster than by doing nothing and letting things spiral out of control.

Get Your All of Your Financials In One Place:

To begin setting up a DIY debt reduction program, you have to know where you stand. You need to set up a single place to handle all of your finances. You will need to have copies of every bill you owe and know what your income is. Gather everything and find a quiet place to sit down. Whether you set up a computer program or use the kitchen table, keep everything together by corralling it in a box or filing cabinet so you know where something is when you need it. You may also want to have a calculator, paper, pen, stamps and envelopes as well. These are things you will commonly need to complete your bill paying and budgeting tasks.

Understand Where You Stand in Your DIY Debt Reduction Plan:

Either create a spreadsheet or use pen and paper, to list every bill you have. Include your insurance, utility bills, and flexible bills such as groceries and gas. Begin by listing your utility bills and insurance. Make a list that shows how much each item is and what the due date is so that you can begin setting up your DIY debt reduction plan. Next, you will need to write down how much you owe on credit cards, car payments and any other debt. You should also list what the interest rate is and how much is the minimum payment you have to make as well as the due date of each of your debts. Organize your list so that it is in chronological order by due date.

Calculate Your Income in Your DIY Debt Reduction Plan:

Now that you know how much you owe, you can look at what your income is. You will want to match up what income you have and when is it coming in. Only then can you go back and see how much money you have left after you pay your monthly bills and debt and see how much is left over for your flexible spending such as groceries and gas. Your flexible spending is the easiest to cut for debt reduction if you have more bills than income.

Choosing Which Debts to Pay off First in Your DYI Debt Reduction Plan:

If you are like most Americans, you have far too many bills for the amount of money you have coming in. You can see where you are spending too much and where you can afford to cut costs. By having everything in one place, you will have a stronger sense of what you can and cannot do to begin paying your debt reduction. You may find you have one credit card that has a higher interest rate, but lower balance. If you can add an extra $15 to pay it off within a month or two, then you can save all of the interest you are paying out. Once you have a game plan of which bills you want to eliminate first, you can begin building your debt reduction plan. When you do successfully pay off one debt, use the funds from that debt to begin paying off the next. For example, your credit card payment is $75 per month. You add an additional $15 extra to get it paid off as soon as possible. Now, take that extra $90 ($75+$15) and put it towards your next target in your debt reduction plan. If you continue to use all of the money in your debt reduction plan, you will pay off your debts faster than by using the freed-up money to splurge on things you do not really need.

It takes hard work and discipline to pay off your debts. When you are tempted to ignore your DIY debt reduction plan, just take a look at your financial records first. When you are making progress in dropping your debt, you will find you are more likely to stick to the program. It is a good reminder to continue the sacrifice and hard work on the journey to being debt free. You will see balances fall and single debts paid in full and be more informed about your own personal financial situation. Once you are comfortable with your debt load, consider building up your savings and investments and put your money to work for you.

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