The first step to getting out of debt is to stop the worst bleeding by not borrowing any more money. Last week’s column dealt with the critical importance of this simple principle. Only after you have steeled your resolve not to borrow any more money are you ready to deal with paying off your current debt.

Here are the steps to paying off your current debt:

REDUCE YOUR INTEREST RATE AND DETERMINE WHAT TO PAY

1. List information for all of your debts. List WHO you owe money to, the AMOUNT you owe, and the INTEREST RATE you are paying. Most people who are in debt avoid looking at these statements. The truth is often difficult to face, but facing this information honestly is important.

2. Call every place you owe money. This is especially important if you are delinquent in your payments. Let them know that you will be trying to pay off your current debt and ask for their assistance. Ask them for a lower rate of interest. Ask them for a payment schedule you can actually pay. Lenders are not gentle to middle-class deadbeats who charge too much and then have to be wrestled to the mat for payment. They are much kinder to people who contact them, explain their troubles and ask for assistance.

3. If possible, consolidate all your debt into the lowest possible interest rate. This may involve opening yet another credit card. The credit offers you get flooded with through the mail are *not* the cards with the lowest interest rate. They don’t give you cash back, airline miles, or discount gift points. None of these reward programs are worth the high cost you are paying for them. Some credit cards may offer some number of months with little or no interest. These can give you some grace period to reduce your debt. You can get information on low-rate, no-fee credit cards at http://www.cardtrak.com

4. Pay everything you can on the debt with the highest interest rate. Pay the minimum on everything else. (Do this if you can’t consolidate everything to the lowest possible interest.)

5. Collect all the credit cards in the house. Lock the cards with a high interest rate someplace safe. These are not to be used while you are getting out of debt. It doesn’t matter what wonderful perks are offered for using these cards. They are never worth the trouble and heartache they cause your family.

PAYING DOWN YOUR DEBT

6. Try to reduce your fixed expenses and use the difference saved each month to pay off your debt. Eliminating features on your phone or dropping channels from your cable plan will consistently save you money each month. Read our series for regular tips on budgeting for ways to live within whatever means you earn.

7. Make one-shot reductions in your debt. Hold a yard sale and use all the proceeds to pay down your debt. Pay cash for everything and use all your change to pay down your debt. Take an evening job or use all of a spouse’s income for the next few months to pay down your debt.

8. Take drastic measures until debt-free. No eating out. No movie rentals. No discretionary spending. Realize that some people live on half of what you make. They use 65% of that for their regular expenses, save 15%, put 10% away for large purchases, and give 10% away to charities. If they can do that, you can live without cable television and gym membership until you are out of debt.

Photo by Ross Findon on Unsplash