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Debts: How to Get Out of Debt by Consolidating and Budgeting.

Outstanding debts are rapidly approaching crisis level for a large percentage of Americans. According to MSN Money, Americans owe nearly $2 trillion in creditor debts, not including mortgages. This averages out to approximately $20,000 of debt per U.S. citizen.

Debts have a way of creeping in like kudzu. Before you know it, credit card bills and personal loans take over and suffocate your savings account. Just like the kudzu plant, if debts are not entirely eradicated they will take root and multiply; completely consuming your life.

Many Americans have become credit card crazy. They whip out their plastic to pay for gas, food, clothing, utility bills, dry cleaning and even a fast food lunch. When credit card bills arrive in the mail, many consumers pay the minimum amount due and continuously increase their debt. High interest rates, late fees and over-the-limit fees quickly add up to hundreds, if not thousands of dollars in additional debt each year.

In order to eliminate debts, the first thing you must do is create a budgeting plan. This involves making a list of income and expenses. If your expenses are more than your income, it is crucial to locate areas where unnecessary spending occurs. Unless you are able and willing to earn additional income, you are going to have to reduce spending in order to pay off debts.

A simple and effective way to track expenses is to carry a notepad and document every penny spent. Most people have no idea where their money goes. The deposit their weekly paycheck, pay their rent and utilities and spend the remainder on basic necessities. If you have to use your credit cards to pay your bills, you are in over your head.

There are multiple options for eliminating debts. In addition to budgeting, other financial remedies include credit counseling, debt consolidation, debt settlement and bankruptcy. Filing personal bankruptcy should be used only as a last resort. Not only does bankruptcy destroy what is left of your credit, it will stick around to haunt you for up to a decade.

Debt consolidation is a good alternative for people who own homes. However, homeowners must have sufficient equity in their homes. Many debt consolidation loans are actually home equity loans which require homeowners to use their property as collateral. In addition to the first mortgage payment, home equity loans are a second loan against the property. If the homeowner is unable to make their home equity loan payment they could potentially lose their house to foreclosure. Therefore, debt consolidation can be quite risky for debtors who have accrued numerous debts.

Instead of perceiving debt reduction as an overwhelming challenge, think of it as playing a game. Find creative ways to reduce spending such as clipping coupons and shopping at yard sales, thrift stores or consignment shops. Sort through personal belongings and host your own yard sale and use the proceeds to pay off smaller debts. Prepare meals at home instead of eating out. If you don't know how to cook, take a cooking class or spend time watching cooking shows.

With practice and patience you can become the master of your money game. By eliminating debts now, you can secure your future and ensure you won't have to work a full-time job when you should be enjoying retirement. Feel free to peruse Simon Volkov's article database and discover more debt-reducing tips.