So you’re up to your neck in a massive pile of debt. There are many circumstances that could have led you here, but responsible financial planning is the one that will get you out. Most debt situations can be corrected with careful planning and intense effort over a period of one to three years.

You’ll need to be honest about the requirement for focused debt reduction efforts. You can do it if you follow these steps to achieve pay off all outstanding debt without filing for bankruptcy protection:

1. Save $500.

Figure out how to save $500 in an emergency fund that will be accessed in the event of an unexpected expense during the debt pay off period. Eliminate every discretionary expense possible and accumulate enough funds to meet the $500 goal.

2. Organize your debt.

Make a chart of every outstanding debt in order from smallest to largest without any concern for interest rates. Immediate feedback will be realized when smaller debt is paid off early in the process.

3. Stop all credit card use.

Cut up the credit cards and spend cash even at the grocery store. Take absolute control of your monthly expenditures by starting and sticking to a budget. Write checks to pay bills (or transfer directly from your checking account in online banking), and allocate cash for all other budget categories.

4. Trim the budget.

Make some difficult decisions and eliminate any expense that is not directly related to necessities for living (rent, mortgage, food, utilities). Consider disconnecting cable service until all your debt is repaid. Reduce the land line phone bill by removing unnecessary features, or do you even need a land line anymore? If not, it’s another unnecessary bill you can get rid of.  See if you can cut back on features or data usage within your cell phone plan to see if that bill can be reduced also.

5. Do not go shopping.

Avoid shopping for anything except for groceries. When shopping for groceries, buy items on sale and learn to cook from what is present in the kitchen. Reduce or eliminate eating at restaurants until all your debt is repaid.

6. Pay the minimum on all but the smallest credit card bill.

Every debt must be maintained in good standing to eliminate unnecessary fees. Pay the minimum payment amounts on all debt with the exception of the smallest on the list. Apply as much money as feasible within the budget to the smallest bill. Be realistic when setting this amount to prevent shortfalls in other budget areas. The idea here is to pay off the smallest bill first by continually hitting it with larger payment amounts, then moving onto the next smallest, and so on until all the credit cards are paid off.

7. Reward yourself.

When a debt is paid off completely, reward yourself. Order a pizza, purchase that Starbucks latte you’ve been missing out on for weeks, or purchase a new game for family game night. Celebrate your success (without going overboard of course).

8. Apply funds to the next debt.

Take the amount that was used to pay off the first debt and add it to the minimum payment that has been paid on the next debt on the list. This method will accelerate the amounts paid on the larger debts. The accumulation effect will cause faster progress in the later months of the process. Every time a debt is paid off all of the money is rolled into paying off the next debt.

9. Delay unnecessary purchases.

Throughout this process, the expense level must be reduced within your household. Spending cannot continue as usual if real progress is to be made on the debt repayment plan. Don’t go booking any vacations, or on any shopping sprees. The idea is to take back control of your debt instead of continually racking up more. And as you pay off debt, don’t tell yourself it’s okay to make additional purchases with what you’ve paid off already. This will just delay the debt repayment process even further (and is probably how you got into this situation in the first place).

10. Celebrate success!

When all of your debt has been repaid, immediately start a savings plan that will prevent the situation from repeating itself. Attempt to save half of the amount that has been applied to the debt from the previous months and years. Decide on a (realistic, financially responsible) reward for your achievement.

Financial spending habits must change to prevent a recurrence of debt overload. Live according to a budget and ensure that all your bills can be paid within the month they are incurred.

Evaluate the period of the debt repayment plan and determine what works for you and your family. Financial discipline is possible and you can do this!

If you need help with a debt repayment plan, make an appointment at your local First Financial branch or check our online event calendar at firstffcu.com for upcoming free seminars. Also, be sure to check out our credit management and debt reduction guide.

Article Source: David Ning for Moneyning.com