According to the Federal Reserves consumer credit report released recently consumer debt is now up to $2.58 trillion. Debt keeps mounting as many Americans struggle to pay their bills.
How bad are things for you? Bill Hardekopf, CEO of LowCards.com and author of "The Credit Card Guidebook", says the first step is admitting you have a problem.
Much like alcoholics having to admit they have a drinking problem, as part of their 10 step program, people in debt have to do the same thing. "It's important to make sure that you recognize and admit that you have a debt problem. Then you can face it head on," Hardekopf says.
Here's what financial experts often offer as steps to help get out of personal debt and tum your financial ship around.
1. Look at the big picture. Before fixing your finances, you must first take account of your complete financial picture. Compile your bills and outstanding debts, including your credit cards, mortgages, student loans, auto loans, personal loans and bank loans, and figure out exactly what you owe on each account. List the creditor, monthly payment, outstanding balance, interest rate, due date and credit limit for each.
2. Pay important bills first. If you have to make choices about what to pay, prioritize the bills that are necessary to cover health, shelter, basic food and transportation to work or school.
3. Call your creditors. They may be able to help you work out a payment plan, lower your rate, or lower your monthly payment, or even waive late fees. If they won't help you shop around for a credit card with a lower rate.
4. Transfer balances. If you have a high interest rates on your cards consider transferring those balances to a card with a lower interest rate. Some cards will offer 0% for twelve months for balance transfers.
5. Quit the cards. If you are feeling like you are drowning in credit card debt, stop using credit cards altogether. Switching to cash or debit cards will help keep balances under control.
6. Prioritize paying down debt. Start with the cards that have the highest interest rates.
7. Bulk up your payments. Pay more than the minimum on your loans and credit cards. As each card gets paid off take the amount you were paying on the card you just paid off and add that that amount to the payment on the next card your paying. If you keep doing this from one card to the next you will pay each card off faster and faster.
8. Check your credit report for mistakes. For your free credit report go to annualcreditreport.com or call 877-322-8228.
9. Get help. If paying down debt and cutting expenses doesn't seem feasible, contact a reputable debt counselor for help. The National Foundation of Credit Counseling (nfcc.org) is a good place to start.
10. Start saving. Nothing you do financially will help you sleep better at night than knowing that you have money in the bank for a rainy day. Even a little bit at time will really add up.
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