Now that you know where you are headed and the steps you want to take to get out of debt, it is time to take action!

Start with the Emergency Fund

Start to save your emergency cushion money. This will help you make it through times with unexpected large expenses without falling deeper into debt. Try to stick to your budget, which will get easier over time.

Consolidate Your Debt

If you can, consolidate your debt at the lowest possible interest rate.

Some credit cards have deals such as no interest (or very low interest) for a year if you consolidate your debt onto the card. If you think you can pay off your credit card debt in a year, this may be a good option. But be sure you read the fine print on the card you are considering as well as your outstanding debt to make sure that you will be able to move it. Look at what the interest rate will be if you do not completely pay off your debt within the interest-free (or low interest) time frame. Often there is a large spike in the interest rate if you do not pay it off within the specified time frame. If your debt will take longer to pay off, look for other credit cards with low interest in general where you can consolidate.

Talk to Creditors

Talk to your creditors if needed. Come to the meeting prepared with your budget and a plan of action. They will probably ask for more than you are offering to pay and will threaten action for non-compliance. But remember that it is cheaper and easier for them to deal with you than to pay a collection agency and only receive a portion of what they are owed. Sometimes you can negotiate for more time or slightly lower payments.

If using credit cards unwisely is a problem for you, consider moving to an all-cash system (at least temporarily).

Keep Budgeting

Continue using your budgeting tool or tools of choice. I recommend choosing one that forces you to enter all purchases manually (and if you go to all cash for most purchases, you will have to enter transactions manually anyway). Entering purchases manually seems annoying, but nothing is better for maintaining awareness of where every dollar is going. You will also get faster and better at budgeting and entering purchases. When you start to train for a race, you may be slow and not able to run many miles, but months of training will increase your speed and stamina. Budgeting works this way too. Entering the purchases you make as you make them, or else keeping your receipts and setting aside time a few times a week to enter your purchases will probably yield the best results. If you wait too long before entering transactions, you may forget the details and a backlog of purchases will take more time.

Make Aggressive Debt Payments

With your emergency fund in place, start making larger payments on your debt. Concentrate your efforts on putting as much as you can into paying off debt. If you have multiple debts, be sure that you continue to pay all minimums and be sure you pay your bills on time.

Watch the numbers tick down month by month and try not to be discouraged if it is difficult to see progress at first. Small progress will eventually turn into big progress.

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