By Mary Caraccioli

Too many Americans know that awful feeling of becoming overwhelmed by their debts. It can feel like you are drowning. There is a way to stop that sinking feeling and get control over your financial future.  It is possible!  I have worked with many people who have changed their lives by adopting these five steps.

There is a catch – you’ve got to do all five steps and be committed. If you are wishing for a fairy godmother to come wave her magic wand and make your debt disappear – this plan is not for you.

1) Stop all unnecessary spending today: Get on a cash budget. Budget enough money for food, transportation and the other expenses you encounter each week. Once that cash is spent – that is it. No more spending. You may keep one credit card in your wallet for emergencies – but you should put it in an envelope that says “for emergencies.”  Chances are you won’t rip that envelope open for a latte.

2) Learn debt collectors’ language: Debt collectors often come across as heartless – they are trained that way. You won’t win them over with a sob story – even if it is true.  Talk to them with numbers. That is where you will get their attention. If they see you are serious about paying down your debt you will likely get them to work with you. Keep talking. Things gets worse when the dialogue ends.

3) Take responsibility: There are many reasons we end up over our heads in debt. Promises aren’t kept; emergencies happen…jobs are lost. Life changes happen. You get the idea it’s because of these reasons we are in the pickle, and usually others to blame. If you are serious about getting out of debt – own it. Then, and only then, you will have what it takes to fix it. By the way, this doesn’t mean others are off the hook. It just means you aren’t waiting for others to right YOUR ship!

4) Get a great partner: There are a lot of shady players promising to help consumers get out of debt. The best source for finding a reputable counselor is through this website: NFCC.org. Here is a link to finding a counselor near you: http://www.nfcc.org/firststep/firststep_01.cfm

I have worked with many non-profit counselors all over the country. They know how to talk with your creditors and can help you organize your finances to get out of debt.

5) Write out your plan: Whether you decide to pay off the card with the highest interest first or the one with the lowest balance – you’ve made the right choice. It’s all about developing the plan that is right for you and sticking with it. Pick a plan for paying down your debt including you weekly budget for necessities, payments to debtors, and ways to get added income (sell stuff or take on a part-time job). Writing the plan down is very powerful and will help you follow through.

By embracing all five steps today, you will immediately stop drowning in debt and begin a new phase of rebuilding your financial life. It is possible, but it takes commitment.

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Okay you did what you said you wouldn’t do.  You are already beating yourself up, so a smack from me won’t help.  Instead, I want to help you right the ship and keep that spending binge from haunting you for years to come. Here are my 5 tips for getting your act together to pay off the holiday and have a great debt-free new year.

1)      Stop all unnecessary spending now! Hide the cards and vow to pay cash or use a debit card for all your spending until the debts are gone. Don’t take a vacation or splurge on any new stuff for yourself (or anyone else) until you do that.  This serves two purposes: it reduces and eliminates your credit card debt and it is a great deterrent.  That pain will stop you from indulging next time

2)      Get a re-payment plan together. This means taking a hard look at how much money you bring in each month and how much you really spend.  Figure out how much is leftover and apply it all to paying off that debt. If you don’t earn enough, cut more spending or make more money. 

3)      Attack the debt. Get your taxes done early if a refund is coming your way.  Can you consolidate your debt to one lower interest card? If not, there are two approaches you can take.  Either go after the card with the lowest balance first,  for a psychological boost, or go after the card with the highest interest first, for a financial boost.

4)      Let everyone in the family and maybe even your friends know about your plan. I know we hate to talk about our money mess-ups- but it could help eliminate any peer pressure spending and who knows you may get a great idea on how to raise money from a friend. Make it fun and make it a group challenge.

5)      Don’t do it again! Next year, next vacation, next temptation- use cash or a debit card and live within your means. Doing anything else is so-  pre-precession.  Worrying about debt creates stress that shortens your life and makes your time here less enjoyable. In the words of the great Cher, snap out of it!