Eliminating debt is the focus of more and more people these days. Perhaps it is due to the recession and the lack of personal wealth. Bad debt results from financing things (using your credit card to buy things) that can be consumed such as dining out, clothes, auto repairs, and even groceries. Too much bad debt can create an unhealthy financial situation. When you calculate the amount of total debt you are carrying including your mortgage, car note(s) credit cards, medical expenses, and others, the total can be quite staggering. Now calculate how much bad debt you are carrying in order to understand your true financial situation.

If you are serious about eliminating your debt, follow the steps outlined below:

1. Determine why you want to eliminate your debt.

Understanding why you want to eliminate your debt is critical. The reasons you want to eliminate debt will be a constant reminder to you when things get tough that it is worth the effort.

Do you want to eliminate your debt in order to save for retirement? According to an article in MSN entitled Retirement crisis: From bad to worse, the Baby Boomers and the post-boomer generations are facing a retirement crisis. Many Baby Boomers have tapped into their retirement accounts in order to pay their bills as a result of the high unemployment rate and the recession.

Do you want to eliminate your debt in order to establish an emergency fund? Has life ever thrown you a curve ball? Do you think it is possible that you will be thrown another curve ball? The point I'm trying to make here is expect the unexpected. An emergency fund will allow you to sustain your standard of living should you lose your income source. An emergency fund of three to six months is recommended. You can calculate the amount you need for an emergency fund by multiplying your monthly expenses by six. The emergency fund should be accessible but only in the event a sudden loss of income occurs. Having an emergency fund provides a sense of security and may help reduce your stress levels.

Do you want to eliminate your debt in order to establish or contribute more to your children's college fund? Do you realize that over the past 35 years, the cost of college has mushroomed by 1000%? At the same time, the importance of higher education has increased by the same amount. College degrees and in many cases, graduate degrees are required in order to obtain employment in the United States.

Do you want to eliminate your debt in order to spend more time with you hobbies, buy an RV, or take a vacation? Do you want to eliminate your debt in order to support the church or charitable organizations? Do you want to eliminate your debt in order to start a business and live the life of your dreams. Do you envision the day when you can devote all of your time and energy to your own business?

2. Put together a plan.

Having determined the reasons for eliminating your debt, it is now time to put together a plan. Your plan should include a set of goals with associated timelines for eliminating your debt. For example, one goal would be to eliminate all credit card debt within one year from today. Or perhaps, eliminate all medical bills within six months from today. Write down your goals along with the respective deadlines. Setting goals and writing them down are crucial to your success because you simply cannot go somewhere if you do not know where you want to go.

When creating a plan to eliminate credit card debt, many financial experts advise that you eliminate the credit card debt with the highest interest rate first then proceed to the next highest. For example, let's say you have four credit cards. The interest rates are 23%, 19%, 16%, and 12%. Their approach would be to pay additional money to the credit card company that is charging you 23% and once that balance is reduced to zero, pay additional money to the credit card company that is charging you 19% and pay off that credit card's debt and so forth.

You want to take the balance into consideration when developing a plan to eliminate credit card debt. It may be wiser to pay off the credit card with the lowest balance then put that credit card in cold storage. Pay the credit card off with the next lowest balance using the additional money that is now available and so forth.

Whichever strategy you choose, remember to write down your goal and timeline for each credit card. The same process can be used to eliminate medical bills, car notes, and even your mortgage if you wish.

Eliminating your unsecured debt with the help of debt consolidating or debt settlement companies will allow you to eliminate your debt in a shorter period of time but your credit will be adversely affected. Debt consolidating companies actually work on behalf of the credit card companies and negotiate to lower interest rates with them. Your debt remains the same. Only the interest rate changes. Your payments may increase due to the shortened time frame negotiated for payoff.

Debt settlement companies will negotiate to actually reduce your debt owed to each creditor. In some cases, your debt can be reduced as much as 75%. You can eliminate your debt quicker can pay less money to eliminate your debt with debt settlement rather than debt consolidating companies but remember your credit will be adversely affected by using the services of debt settlement companies.

3. Execute your plan.

Now that you have your goals and timelines as well as your plan, it's time to put it into action. Take action immediately and don't procrastinate. "To think too long about doing a thing often becomes its undoing." ~Eva Young

It's important to imagine a debt-free life. Motivate yourself by visualizing how life would be without the debt you wish to eliminate and remind yourself of the reasons you wish to eliminate your debt.

Celebrate each achievement and reward yourself, without adding to your debt of course. Take pride in the fact that you are on the road to a better, less stressful, and happier life.

Never give up on yourself or your dreams. Article Source: http://EzineArticles.com/4862958