5 day debt reduction plan

5-Day Debt Reduction Plan: Don't Ever Stop

Mikey Rox — Fri, 10 Jun 2016 10:30:11 +0000

[Editor's Note: This is part five of a five-part series on debt reduction. To read more, see the rest of the 5-Day Debt Reduction Plan.]

The harsh truth about debt reduction is that many people don't stick with their plan long enough to see real results. They start off motivated and excited, but they lose steam after a while and never cross the finish line. Paying bills isn't super fun, after all. But if you want to get back in the black, it's important that you think long term without false expectations of overnight success. Luckily, there are plenty of tricks to stay on track, or get back on track if you've lost your way. Here are a few to consider.

1. Switch Up Your Strategy

As I mentioned in the previous entry of this series, you can pay off balances successfully using the avalanche or snowball debt methods or a combination of both; you have to decide which method works best with your psyche. Just because you start off using one method doesn't mean you can't change it up. If you start the avalanche method and notice your motivation dwindling after a few week or months, give the snowball method a try, or vice versa. It's a matter of trial and error and finding the method that builds momentum.

2. Track Your Progress

It's hard to stay motivated if you don't track your progress. If you're carrying a large amount of debt, it can feel like you're spinning your wheels and getting nowhere. It can take awhile to make a noticeable dent in your balances, and if you don't think you're making progress, you're likely to give up. Although you don't have to obsess about your balances or check statements on a daily basis, it doesn't hurt to recalculate what you owe every couple of months and post your updated balances. Sometimes, we need a visual reminder of our progress to stay motivated.

3. Celebrate Milestones — You Deserve It

Paying off debt is hard work, so it's okay to reward yourself for a job well done. This doesn't suggest going on a small spending spree every time you make a payment, but you can (and should) reward yourself with an inexpensive treat for hitting milestones.

"Humans are emotional not logical creatures. Even though logically you don't need to splurge to pay off a debt faster, this small reward triggers the need you have for emotional fulfillment," says investing blogger Trey Henninger. "It's important to have these small rewards in order to be successful in a hard task like paying off credit card debt."

If you're on a spending freeze and haven't seen a movie outside the house in months, take yourself to a movie after paying off the first $250 of debt, and then plan another low-cost activity after paying off the next $250. Just make sure you pay with cash and not credit; that'll defeat the purpose, and I don't want to come to your house and wag my finger at you.

4. Find an Accountability Partner

Sometimes, we do better when we're accountable to somebody else. Not that you should go around announcing your debt to everyone, but a trusted friend or relative can be the right person to help you stay on track. This person can check in with you from time to time, help you gauge your progress, and offer support when you're on the verge of burnout or resisting an impulse buy.

Getting an accountability partner means you'll always have someone in your corner encouraging you. At the same time, stay away from those in your life who encourage or trigger spending. If you have a friend who always wants to shop or go out to dinner, let them know up front that you're on a spending hiatus so they'll give you the space you need to work on your finances. Or, better yet, invite this person to join your debt-eliminating crusade as well; they could probably benefit from it.

5. Remember Why You're Paying Off Debt

Since it can take months or years to pay off debt, you might forget why you started this journey in the first place. Whenever you feel like giving up, or if you feel that your efforts aren't paying off, think back to the day you decided to work on eliminating your debt. What was your motivation? Did you want to improve your credit so you could buy a house, or were you tired of stressing about high balances? Whatever the reason, focus on the big picture and imagine how amazing your life will be once you are debt-free.

The Debt Is Gone — Now What?

Finally, you've paid off your debt and you can breathe a sigh of relief. It was a rough road and at times you didn't think you would succeed, but you did and it's an indescribable feeling.

For the first time you know what it feels like to have no debt and disposable income, and your mind might start thinking of uses for the extra cash. One of the worst things you can do, however, is to take your disposable income and go on spending binges. Yeah, you can have a little fun, but now that your debt has dwindled, it's the perfect opportunity to fix other areas of your personal finance.

Building a solid financial foundation isn't only about getting rid of debt. Saving should also be a priority, and now that you're debt-free, you can focus on saving your money.

You've already done the hard part, which was to search and destroy unnecessary expenses. Rather than add these expenses back into your budget, take the money you were using for debt repayment and start paying yourself. With an adequate savings, you're less likely to end up in debt again. If you were giving a creditor $300 a month, think of your savings account as another expense and deposit this amount into your account every month.

You can slowly build a three to six-month cushion, start a down payment fund for a house, or if you haven't already, open a retirement account or increase your retirement contributions. Whatever you do, never stop saving.

Bottom Line

Bad debt can rob you blind. It can take your joy, your motivation, and your options. But once you start on the path to being debt-free, the dark cloud hanging over you becomes lighter and lighter. You can fight back against debt, but you have to take it one small step at a time.

Debt Management Resources

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5-Day Debt Reduction Plan: Pay It Off

Mikey Rox — Thu, 09 Jun 2016 10:30:06 +0000

[Editor's Note: This is part four of a five-part series on debt reduction. To read more, see the rest of the 5-Day Debt Reduction Plan.]

You've combed through your budget and you've found extra money to direct toward debt repayment — which means the time has finally arrived to pay it off.

Getting rid of debt isn't only about improving your budget and having the right tools — you also need the right strategy to succeed. Although there isn't necessarily a "best" way to pay off debt, some strategies can get you to the finish line quicker. You need to understand different pay off methods and do what works best for you.

There are two popular ways to attack your credit card debt. The first is to pay the minimum on each card except the card with the smallest balance. That card you'll throw all the money you can at it. This is called the Snowball method.

The other method is to pay the minimum on each card except the card with the highest interest rate. You'd put in all the money you can into that card. This is called the Avalanche method. Which one is best for you depends on your personality.

Here are the details of the debt example we're using in this series:

Debt Avalanche

There are two factors to consider when paying off debt: the amount you owe and your interest rate. When you avalanche your debt, you focus on paying off the debt with the highest interest rate first, regardless of the balance. This approach prioritizes debt according to costs. The higher your interest rate, the more it'll cost to carry the balance. So the idea is to get rid of your most expensive debt as early as possible.

If you've been following this series, you've (hopefully) already written down your debts including amounts and interest rates. The next step is taking your "found" money and making higher payments on the debt with the highest rate, while only making minimum payments on your other debts. Once you've paid off this debt, move on to the balance with the next highest interest rate and continue the cycle until you're debt-free.

Using the debts in the example from Day 2, you'd target Credit Card #3 first, then Credit Card #2 and so on until Credit Card #1 is paid off.

Total Debt: $10,000

Monthly Payment: $200 minimum + $300 "found" money = $500

Months to Payoff: 25

Interest Paid: $1,811

This method will result in you paying the least amount of interest possible.

Debt Snowball

This method is similar to the Avalanche, but instead of concentrating your efforts on the debt with the highest interest rate, you focus on the debt with the smallest balance. You'll make higher payments on this debt and minimum payments on all other debts. And once you've paid off this balance, you'll funnel the money to the debt with the next smallest balance, and so on. Using the debts in our list, you'd start at Credit Card #4, move to Credit Card #1, and so on until you paid off Credit Card #3.

Total Debt: $10,000

Monthly Payment: $200 minimum + $300 "found" money = $500

Months to Payoff: 26

Interest Paid: $2,092

Although the Snowball takes a month longer than the Avalanche — and costs more in interest — it's still very popular. The Snowball lets you tackle easy balances first, and you see results of your efforts right away, which can give a psychological push to continue on the path. Even that small amount of encouragement will help you stay the course over the long term.

A Simple Debt Repayment Calculator to Try

You can use the same debt repayment calculator we used to crunch your own numbers and compare strategies. You'll find a payment plan, too, that tells you how much to send to each creditor every month of the plan until it is paid off. How easy is that?

Debt Repayment Tactics That Work

Whichever method you choose, remember that debt repayment isn't easy. But don't give up. I never promised this would be a walk in the park, but there are several tactics to keep you on the right track.

1. Don't Forget Your Budget

Finding extra money for repayment required revamping your budget and coming up with a monthly spending plan that prioritized expenses. For any repayment plan to work, you have to remember and stick with your budget, or else you'll revert to bad habits. Don't forget to revisit your budget every week and look back month-to-month to track your income and spending. You don't want frivolous spending to creep back into the picture and throw you off track.

2. Make a Payment Every Two Weeks

Some creditors accept partial payments and allow customers to make more than one payment a month. Rather than make one monthly payment, break up the payment over two weeks. Since credit cards typically charge interest on a daily basis, the sooner you get a payment to your creditors, the less interest you pay. Also, making bi-weekly payments allows you to get in one extra month of payment each year (you'll make 26 payments, the equivalent of 13 months). This is an important tip to remember! If you owe $3,000 on a credit card with an interest rate of 16% and you make a $100 payment each month, you can save $100 and pay off the balance four months sooner by switching from a monthly payment to a bi-weekly payment.

3. Redirect Money From "Almost" Impulse Buys

You're only human, so yeah, at times you'll be tempted to make an impulse buy. Like all vices, you have to learn ways to overcome these urges.

"If you feel the urge to buy a new pair of shoes or sunglasses, take a quick peek at your credit card debt by viewing your mobile app," recommends consumer and money-saving expert Andrea Woroch. "This will remind you of your debt-free goals and every time you seriously avoid an impulse purchase, make a payment in the amount that you would've used on that item."

4. Implement a Spending Freeze

A spending freeze can jump-start debt elimination, and it doesn't have to be for an extended period. If you can't handle a six or 12-month freeze, shoot for one to three months. For this to work, you must commit to only buying necessities — no matter what. This means no eating out, no movies, no coffee runs, no hair and nail services, no eBay shopping, no extras of any kind. A spending freeze doesn't mean you can't have fun, but you'll have to get creative and look for ways to entertainment yourself for free. Keep track of how much you're saving and put this money toward debt. Always remember to "bank your savings!"

5. Automate Your Payments

If you don't think you're disciplined enough to increase monthly debt payments on your own, automate your finances. You can set up automatic payments between your creditor and bank. You choose the payment amount and the payment date. All you have to do is make sure there's enough funds in your account.

6. Inquire About a Cheaper Interest Rate

Remember when your mom told you that "You'll never know unless you ask?" Well, she was right (again!), and getting a cheaper credit card rate is often a matter of asking for it. Your creditors may not voluntarily lower your rate, but they might cut you some slack if you request one, especially if you have a good payment history and threaten to take your business elsewhere. If your credit card company won't budge on your rate, you can apply for another credit card with a lower APR and move your balance from a high-rate card to a low-rate credit card. You also can look into refinancing loans to see if you qualify for a lower interest rate. A lower rate reduces your monthly payment, but if you want to chip away at your debt faster, continue making the original payment.

7. Do a Balance Transfer

If you can commit to a certain repayment budget, you can look into getting a new credit card with a 0% APR for balance transfers promotion. How this works is simple: transfer your existing debt from your old cards to your new one. During the promotional time period, you are charged zero interest.

For example, say you can get approved for a card with a 15 month intro APR of 0%, and you transfer $10,000. After 15 months of $500 payments, your balance will be a mere $2500. After that, the interest rate kicks in. Using 13% APR, you'll pay off the rest of the balance in 6 months with $85 in interest cost. That means instead of 25-26 months and $2,000 in interest, the balance transfer option saved you $1,900 in interest and you're debt free four to five months earlier!

There are several things to consider when doing a balance transfer. The most important thing is that you don't deviate from your repayment budget just because you're no longer paying interest.

Debt repayment is a process, but you'll finish strong as long as you keep your eye on the prize and remain on the right path. I'll share some tips about that — and what comes after you've eliminated your debt in the final installment of the series.

Debt Management Resources

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5-Day Debt Reduction Plan: Search and Destroy

Mikey Rox — Wed, 08 Jun 2016 10:30:07 +0000

[Editor's Note: This is part three of a five-part series on debt reduction. To read more, see the rest of the 5-Day Debt Reduction Plan.]

Some people give up on the idea of paying off debt because they think they don't earn enough money. Yes, life can be expensive, especially when wages don't keep pace with the cost of living. We're all victims of the tough economy, but this doesn't mean we can't win the war against consumer debt.

If you talk with anyone who's successfully paid off debt, you'll likely notice a common thread: Commitment. While these folks may not be rich or have a ton of money, what they do have is an air-tight spending plan, and they know exactly where their money is going.

You Need a Budget

To get a handle on debt, you first have to get a handle on your budget and monitor your spending. Like adding up your debt, you'll need to write it all down rather than relying on your own estimates. There's a good chance that you're spending more than you think you are in many categories. In fact, "financial advisers who press clients to tally their spending say the numbers are often at least 20% higher than the individuals had thought," according to the Wall Street Journal.

Coming up with a budget isn't hard. It's simply a matter of identifying your fixed and variable expenses. The good news is that with modern technology, you don't have to budget the old-fashioned way with a pen and paper. There are plenty of apps and software programs that simplify budgeting, and many are free to download. For example:

Mint
Pocket Guard
Good Budget
Mvelopes
Home Budget
Level Money
Spendee
...and many more, including a simple spreadsheet.

These apps are effective because they allow you track income and expenses, and you're able to see what you're spending on a daily, weekly, or monthly basis. Some budgeting apps also include pie charts and graphs so you know the percentage of your income that's spent in different categories. When you see where your money goes, it's easier to identify areas where you need to cut back.

Tracking Your Expenses

It can be hard to account for every cent when you first begin, but if you're following along with the series, on Day Two you collected all of your recent credit card statements, which is a good place to start. If you're at a loss for spending details, go ahead and make estimates now, and create a spending book and track every penny you spend (every one!) for a month. You can update the estimates you make today afterward.

Group your expenses into two categories: Fixed and Variable. Fixed means you can't change it (immediately). For example, these might include your mortgage, car payments, and insurance. The other expenses are variable, which means that you can adjust them easily, for example groceries, dining, and even subscriptions like Hulu or Netflix (you can cancel them or lower the subscription level at any time).

If you're overspending on a fixed monthly expense like a house or car, you can't get rid of those expenses overnight. But depending on how much debt you're in, how quickly you want to get out of it, and whether you've suddenly realized you've been living outside of your means, you should consider downsizing or even moving to a different city.

But in the meantime, take a hard look at your variable expenses and start cutting.

Keep Your Goals Attainable

As we saw in Day 2: Add It Up, if you want to get rid of your $10,000 in credit card debt in two years, you'll need to allocate $500 per month toward debt repayment. If you're currently paying $200 a month, rework your budget to free up an additional $300 every month. This breaks down to about $75 per week.

Here are some ideas about how you can drum up that extra cash.

Reduce your weekly grocery budget. You can save money by skipping the brand names and buying generic and by planning meals based on the weekly sales. Use a credit card that offers rewards for groceries and always bring a list and stick to it!

Cut back on entertainment. If you're currently spending $40 a week on entertainment, which might include movies, dinner, and drinks with friends, scale back to $30 a week. Something as simple as ordering water instead of a soda or iced tea can save you $5-$10 each week.

Increase Your Income

The other part of your budget includes the money you have coming in. The more you make, the more you can allocate to your debt reduction. Often it's easier to get a side gig to get the extra money than to cut costs. Here are ways you can increase your income (make sure you're putting in all that extra money into your credit card payments!).

Ask for a raise. Consider whether it's an appropriate time to ask for a raise. Has the company been doing well? Have you been with the company for a while and have gotten positive feedback regarding your performance? Don't be shy. The worse that can happen is your boss will say "no."

Get a side job. There's a whole online gig economy out there. Find something you can do. Do it.

Sell your stuff. We all have things sitting in our garage or the back of the closet that haven't seen the light of day in years. Go through them and see what you can sell. Better yet, if you're crafty, start making stuff to sell.

Debt Management Resources

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5-Day Debt Reduction Plan: Add It Up

Mikey Rox — Tue, 07 Jun 2016 10:31:03 +0000

[Editor's Note: This is part two of our five-part series on debt reduction. To read more, see the rest of the 5-Day Debt Reduction Plan.]

Excuses and bad habits might have stopped you from achieving financial success in the past, but now that you're ready to tackle debt like a boss, it's time to get down to business. Paying off debt is hard work. In fact, it's probably one of the hardest financial challenges you'll take on, aside from actually making the money you'll need to pay it off. Considering that then, you won't get far without provisions in place.

To get to the finish line — or even come close to it — you'll need a certain amount of courage to attack your debt head on. It's a frightening prospect, for sure, and maybe you've tricked yourself into believing your debt problem isn't that bad. While this mindset might help you sleep better at night, it doesn't reduce balances. So before you can move forward in this process, you have to add up what you owe. Chances are, the final number will be a scary one.

1. Decide Which Debts to Include in Your Payoff Plan

Some people come up with a plan to pay off all of their debt, including student loans, auto loans, and mortgages, whereas others focus on unsecured debts like credit cards and personal loans. All debt isn't created equal. We're focusing this plan on credit card debt which can have more of a negative impact on credit scores and usually comes with higher, often much higher, interest rates.

2. Take a Few Minutes to Gather Your Statements

Since you're adding up what you owe, create a simple spreadsheet to record this information. It's important to get everything down. Some people have no idea of how much they owe. They might have an estimated number in their head, but it's not until they see their debt on paper that they're able to grasp the severity of a situation — and subsequently reach for a solution (or a drink).

3. Next, List All Your Debts

Include detailed information about your debt, such as your current balances for each account, minimum monthly payments, and interest rates.

Your spreadsheet might look something like this:

After writing down your debts, calculate the total balance and total minimum payment due. You'll see how much you owe down to the cent, as well as how much you're currently paying in minimum payments each month.

The Cost of Minimum Payments

Debt elimination works best when you set attainable goals for yourself. I've harped on this practice in plenty of my Wise Bread posts before and I can't stress the importance of goal setting enough. It isn't enough to know your numbers; you need a plan that allows you to pay down balances sooner rather than later, or else you could carry debt for decades and pay thousands of dollars in interest. You also need to do it in a reasonable way so you'll stay on track.

At $10,000, your total minimum payments due is $200 (credit cards usually charge between 1%-3% of the balance due as their monthly minimum payment). The following month, your minimum payment due will be lower, because your balance is (slightly) lower. But if you follow this course and only make the minimum due each month, it will take you 50 years to pay that off, along with paying over $28,000 in interest. I'm sure you don't want to hold on to that debt for decades, nor pay tens of thousands in interest.

If however, you kept your monthly payments at $200, you'd be debt free in eight years, and the interest you'd have paid would be $8,916. See the difference?

Set Achievable Goals

Understandably, you want the balance gone within the next few weeks or months. But you have to be realistic. Unless you strike gold or get a windfall (or start being really really nice to the old rich person down the street), you probably won't be able to pay off $10,000 in credit card debt in three months. But you definitely can punch those numbers and get out of debt in less than eight years.

Let's say that you are able to find an extra $300 a month in your budget to steer toward debt reduction, bringing your total debt payment to $500 per month (your current minimum due plus $300). Without interest to pay, you'd knock this down in just 20 months! Unfortunately, you actually do have to pay interest until your debt is cleared.

The average interest rate on your $10,000 is a whopping 17.88%. (Ouch!) That means it'll actually take you two years and almost $2,000 in interest, (still a huge improvement over the eight years and almost $9,000 in interest if you just paid $200 per month).

Every little bit you can add to your monthly debt reduction budget helps. For example, if you can increase your monthly payment by just another $50, your debt is gone in 22 months, and you'll have paid $1,600 in interest.

The key to remember is that small amounts really do add up over time. The more of those small amounts you can find and put to work for you, the faster you will be able to eliminate your credit card balances. You won't get out of debt without making some sacrifices, however. Which leads us to the next step in this series: How to search for unnecessary costs and destroy these to improve your cashflow and free up more of your money to retire debt.

Debt Management Resources

Have you recently chipped away at a decent amount of debt? How did you do it? What tactics did you employ? I'd love to hear from you in the comments below.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5-Day Debt Reduction Plan: Stop Waiting for Tomorrow

Mikey Rox — Mon, 06 Jun 2016 10:30:06 +0000

[Editor's Note: This is the first part of a five-part series on debt reduction. To read more, see 5-Day Debt Reduction Plan.]

Debt sucks. It ties up your resources, robs you of the ability to save, and can cause stress, anxiety, and depression. Still, debt is a big part of our society — so big that many don't realize the impact it has on their personal finances, even when they're struggling to keep up with payments.

Some people stick their heads in the sand because it's easier to ignore debt than take responsibility. The consequences of overcharging and overspending eventually catch up — and that burden can lead to other consequences, like physical and mental health issues — but it doesn't have to.

If your debt is out of control, today is the day to take control of your money.

The good news is that you don't have to be a financial guru or have a ton of cash to succeed. Whether you have a little or a lot of disposable income, you can begin chipping away at your debt little by little each day when equipped with the correct set of tools and a handy guideline.

Debt Reduction Starts With a Decision

Be honest, how long have you been talking about reducing debt? A few weeks? A few months? A few years?

Now think back to the first time you expressed a desire to get rid of debt. Have you successfully paid off (or paid down) some of your balances? Or have your balances remained the same or increased?

If you answered "yes" to the last question, you're not alone. Getting rid of debt has its challenges, and at times you might think it's impossible. The fact that you're reading this article demonstrates a desire to change your mindset and your situation. It doesn't matter what you've done (or haven't done) in the past; this can be a new beginning and the first day on your journey to eliminating debt.

You're Not the Only Person With Debt, But You Still Need to Address It

Some people say debt is a part of life and everyone should stop whining and accept debt for what it is. Don't let the naysayers get in your head.

Yes, most of us have some sort of debt, but this doesn't mean we have to accept all types of debt. Student loans and mortgages are "good" debt. They are usually cheap (the interest rates are low), and both generally improve our financial lives (education helps us earn more; a home is a valuable asset).

Credit card debt, on the other hand, can be a vicious monster. It's expensive and most of what we borrow for will not improve our financial lives. But the moment we confront the monster and say "no more," the easier it is to break habits that keep us indebted.

What Led to Your Debt?

There's not one particular bad habit, but rather several possible habits. Everyone has their own weakness — mine, for instance, is clothes shopping — and it's each person's responsibility to identify habits that keep them in a pattern of overspending.

Impulse Buying

Most of us are familiar with this type of buying. You go to the store with intentions of buying one item, but you walk out with three or four items — basically every trip to Target I've ever had; you know what I'm talking about. This behavior may seem innocent, but it can throw off your budget and increase the likelihood of debt.

Lack of a Budget

If you never budget, you probably have no idea where your money goes, which means you could be overspending on nonessentials and using credit cards as an extension of your income. Keeping a paper trail helps you visualize how much you're spending and where your money is going, and that alone can be a deterrent to spending more.

Keeping Up With the Joneses

If your best friend or neighbor buys a new car, you may feel pressure to keep up and prove you can hang with the big spenders. But in reality, you're digging a financial hole for yourself.

We're all guilty of at least one of these bad financial habits. We're human, so we're going to make mistakes. But regardless of the habit(s) you're guilty of, you can break the cycle.

Lack of Income

This isn't a habit, exactly, but whenever our income falls short of our expenses, and we've cut as much as we can, it's time to find more money. Whatever side job or career shift you choose, keep your debt reduction goals in mind. The extra money you earn should go first toward your debt reduction plan.

The High Cost of Credit Card Debt

If you need help overcoming bad habits and breaking out of debt, it helps to have an understanding of the true cost of debt.

Take for example a $5,000 credit card balance. If you're making $100 payments every month, in your mind, you should be able to pay off this debt in roughly 50 months (4 years). It's simple mathematics, right? Well, not exactly. There's this "little" thing called interest, which is what you pay for the privilege of using credit.

Let's say the interest rate on that $5,000 is 18%. Making $100 payments every month, it will take almost eight years to pay off the balance, and you'll have paid over $4,000 in interest, for borrowing that $5,000. Think of how much interest you could earn if you invested that money instead.

When you get a credit card statement, the amount due is typically between 1%-3% of the total balance. It will take a staggering amount of time to pay off your debt if you only make minimum payments. If you're just making the minimum payments, to pay off $5,000, it would take more than 39 years. You would have paid over $8,000 in interest.

"It will take a discouragingly long time to pay off a debt if you stick to only minimum payments," says Julie Ford, a financial planner in New York City. "Creditors want you to only pay the minimum amount so they can collect interest from you for as long as possible."

The more money you give creditors, the less money you have available for building a rainy day fund. And of course, if you don't have a reserve, it only takes one emergency to put you deeper in debt.

According to the American Household Credit Card Debt Study, the "average U.S. household with debt carries $15,762 in credit card debt," and a recent Google Consumer Survey found that "approximately 62% of Americans have less than $1,000 in their savings accounts, and 21% don't even have a savings account." As a personal finance expert who has experienced debt myself, these statistics are sobering to say the least.

When debt prevents saving for a rainy day fund, it may also interfere with your ability to save for retirement. Even if you have a 401K or an individual retirement account, you might only contribute the bare minimum, if anything. As a result, the prospect of working until you're literally on your deathbed is a real possibility.

Find Your Motivation — And Stay Motivated

The road to getting your bank accounts into the black can be rough. What's the motivating force driving your desire to reduce debt? If you don't have an end goal or a reason for eliminating debt, it's easy to give up as soon as you hit a bump in the road. I've seen it time and time again, especially from chronic spenders. To avoid this pitfall, brainstorm and write down what you hope to accomplish by reducing debt.

Do you want to set a good example for your children?
Are you tired of losing sleep and worrying about your debt?
Do you want to buy a house, but fear debt will prevent qualifying for a mortgage?

Of course, it isn't enough to know what motivates you, but rather you have to stay motivated. The best way to do this is to surround yourself with likeminded individuals — those who share your goal and can offer encouragement along the way — and avoid those people who encourage your negative spending habits, like your house-poor friends who spend all their disposable income on Thirsty Thursday shots and late-night tacos. (We all still have a few of 'em.)

If your close friends and family are in debt and don't have a desire to reduce or eliminate their balances, don't expect these people to steer you in the right direction or provide the support you need. Look outside your inner circle and connect with people who share your mindset. For example, you can work with a financial planner, join a debt support group, or follow the debt success stories of personal finance bloggers.

Stop Procrastinating

Procrastination is the avoidance of starting or completing a task. It's a natural human tendency and we procrastinate for different reasons. These reasons might include the fear of failure, lack of interest, and even the fear of success. But with regard to debt, procrastination might have everything to do with lack of knowledge. You know you need to deal with your debt, but you don't know how, so you put it off.

If you want to overcome procrastination, you have to learn ways to make debt reduction a reality. It's a step-by-step process that can take months or years. But the process is easier than you think when you have realistic expectations and set small, manageable goals for yourself

But before you can get to that point, you need to first find out how much you owe and learn strategies to monitor your debt. Check back tomorrow, and we'll take that first step by Adding It Up.

Debt Management Resources

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: