Paying off debt can seem like a losing battle, but it doesn’t have to be. Student loans, credit cards, car loans, medical bills, old debts and home mortgages can all be paid off within a reasonable timeframe. The trick is knowing how to do it and figuring out what works best for you. There may be a little bit of trial and error involved, but the key factors to remember are to keep track of your income, manage your expenses, cut back where you can and put your surplus cash towards your outstanding debts.

Income

The first thing you have to do to create an effective debt management plan is to figure out how much income you or you and your spouse bring in per month. The reason for this is simple. If you don’t earn more money than you need, you will never get out of debt and may even end up falling further behind.

The easiest way to calculate your income is to figure out your average take-home check and multiple it by the number of times you get paid every month. This is more accurate than taking your salary and dividing it by 12. If you get paid biweekly, two months out of the year, you get paid three times which skews your average monthly income and doesn’t include the taxes that are taken out of your check each pay period which can drastically alter the amount of income you think you have available to pay off your debts.

For example, if you make $25,000 a year that averages to $2,083 per month, but that’s not your take-home pay, and it doesn’t give you your average monthly income if you get paid biweekly. If your overall tax rate is 23 percent, you are actually taking home $19,250 a year. That translates to $370.19 per week or $1,480 per month with biweekly pay periods. That’s quite a bit less than $2,083 per month.

Expenses

Once you’ve figured out your average monthly income, start calculating your bills including groceries, work lunches, out to eat expenses and gas for the car. Also include any habits that you regularly spend money on such as smoking, drinking, shopping and miscellaneous expenses. Add all those expenses together then multiply them by 10 percent to give yourself a monthly buffer in case you spend unintentionally overspend. Your final total represents all your monthly expenses.

Once you have your income and monthly expenses, subtract your expenses from your income. This will tell you how much money you have leftover every month to pay down your debt.

Cutting Back

If you’re in the red, or you don’t have a lot of extra income, think about ways you can cut back. Would it be cheaper to take your lunches when you go to work? Can you stop eating out altogether? Do you really use your gym membership? Can you cut back on your gas expenses and household energy expenses? Do you really need full coverage car insurance? Once you figure out what you can live without, cut those expenses and put the extra income towards paying off your debt.

Paying Down Debt

Once you know how much money you can put towards your debts, figure out how you want to pay them off. Do you want to start with the smallest balance first? Do you want to start with the largest balances first? Do you want to pay down the bills with the highest interest rates first? No matter which way you decide to start paying down your debts, stick with it. As you pay off more and more accounts, you’ll have more and more money left over to pay down your remaining accounts.

Options For Getting Out of Debt

When new credit card holders succumb to the giddiness of being able to purchase virtually anything, they tend to go on a subconscious shopping spree. As a result, they lose control over their expenses, and they are left with debts that are way beyond their means.

This is why experts in finance management constantly give advices on how to avoid excessive spending. This eliminates the potential stress of dealing with debtors, and give a wider margin of chance that borrowers can have the cash to pay for their outstanding credits. Plus, keeping debts at bare minimum can do wonders for credit scores and records.

Emergencies and impulsive buying once in a while are of course inevitable. This gives more reason to keep track of expenditures to keep things manageable. This helps in paying debts easier and faster.

It is after all, better be safe than sorry.

But what happens when things got out of hand, and borrowers are left with a chuck of debt that seems impossible to pay? This is where two options come at play.

Paying Debts on your Own

It is easy to be lured into withdrawing the entire bank savings to pay the debt in one go. While there is nothing wrong with this, doing so could instantly leave anyone in destitute. As such, there’ll be no funds left to be used for the rainy days.

Borrowers have the option to settle their debts by negotiating with their creditors. Not all companies allow installment credit payment but there’s nothing wrong in trying. It helps to remember that agencies who lent money to their clients would want to have a return of investment. Chances are, justifying the situation and presenting evidences to prove that the credits will be paid eventually would make the debtors reconsider.

After the request gets approved, individuals should then make do with their current budget. It is imperative for them t earmark a portion of the budget to be used in paying their debt. With strict allocation and self-control, they may manage to fund their groceries and other needs, while keeping up with their financial responsibilities.

The process could be slow, but at least the debts are not left idle. Neglecting such liability could only result to paying larger credits as the amount of money borrowed increase as it accumulates interest.

Seeking Debt Management Assistance from Agencies

Fortunately, there are loads of specialized companies that can extend a hand to those who are trapped in impossible debts. Debt relief programs can either consolidate the credits just so the borrowers can pay lesser every month. Instead of sending multiple payments, their debts will be rolled into one. Their bills would then significantly decrease, thus giving individuals breezier payment terms.

Agencies may also work their way to help borrowers pay only a fraction of their debts. Representatives from debt relief companies may collaborate with the bank or lender and make some negotiations.

While this sounds tempting, there’s usually a drawback of trusting these specialized companies. At some point, they may cause ramifications in one’s credit history and score. Even when the debts are fully paid, it may just be impossible for the borrowers to start with a clean slate, as their records are tarnished with debt settlement mishaps.

Still, this looks better on paper than bankruptcy. Rather than declaring impoverishment that can hamper loan and insurance applications in the future, they are better off in the hands of debt management service agencies. For one, they can be relieved from the burden of looking for a viable source of fund. They may also enjoy several benefits if they know how to do things right.

Debt Solutions for Everyone

Debt is something that everyone dreads, and yet which not many work hard enough to avoid. It’s a problem that creeps up on you, after a series of bad decisions, wrong turns, and unwise investments. You borrow a little here and there, forget to repay a few things, and procrastinate a few times too often. Before you know it, the numbers grow large and you realize you’re in serious debt.

Don’t Ignore the Problem

The important thing is to realize your problem and face it. So many people treat debt as a problem that will go away by itself, which never happens. The only way to solve a debt problem is to fight it with hard work, savings, and budgeting, and in order to do that you first have to look the problem in the face and see it for what it is.

Figure Out Your Situation

You have to take stock of the situation and figure out what the numbers really are. Gather all your debts into one place and figure out exactly what you owe. There are credit card debts, debts on mortgages, new cars, furniture, computers, and other large purchases, debts to friends and family, student debts, and many other debts you might be stuck with. Make a list of all of these; find out when they’re due, what additional fees you owe, and how long you have to repay them all. You might be surprised at how serious the situation is—but it’s better to figure that out right away rather than when things get more serious.

Bring Your Situation to Professional

You probably won’t know how to deal with a debt problem most effectively unless you go to an expert for their advice. There are many debt advice and consolidation services that can help you with formulating a solid plan for repaying your debts. Go to one of these, even if it costs you a little extra, as they know the best strategies to deal with debt. They’ve helped many in the past and they can certainly help you too.

Get to Work

Freeing yourself from debt isn’t something that you can just do without any effort or work. It’s much easier to get into debt than it is to get out of it. It will require you to plan, work, and sacrifice, and it’s not going to be simple. Listen to the advice you get from experts, and get the help of friends and loved ones to free yourself from the situation. It’s going to be hard, but it’s not going to be impossible—always remember that.