Step 1: How much money do you really have?

Part 1: Chart Your Debt

It’s time to face facts: How much debt do you really have? According to Jean Chatzky, many people don’t know – and of those who do know, often time their spouses don’t. You must find out how much debt you’re carrying and at what interest rates. Dig out all your bills, print out the chart below and fill it out to see how much debt you really have. Once you know your total debt, you can begin a plan to eliminate it.

Click here to print this chart to track your debt
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Part 2: Get Your Credit Score

Did you know that you can now get one free report each year from each of the three credit bureaus? You could request them all at once, but the better choice is to get one every four months, so you can make sure that you haven’t been a victim of ID theft or false claims from collection agencies.

The Federal Trade Commission has set up a web site – www.annualcreditreport.com – where you can request your free report.

If for some reason you can’t get a free report, you can buy one from one of the three credit-reporting agencies:

• Equifax: 888-766-0008 or www.equifax.com
• Experian: 888-397-3742 or www.experian.com
• TransUnion: 800-680-7289 or www.transunion.com

It’s imperative to know and keep track of your credit score. As you start paying down your debt, your credit score will increase, which can mean lower interest rates for you. One of the best ways to keep constant track of your credit score is to use the industry standard services of myFICO. myFICO is highly recommended by financial guru Suze Orman. In addition to getting all of your credit scores, myFICO also offers an excellent monitoring service called Score Watch. Join now and you can get a free 30 day trial run.

Part 3: Prioritizing Payments

1. Essentials: These are the necessities of life. You can’t live without your house, so must pay the mortgage or rent. You need warmth in the winter and lighting year-round, so make sure you pay the utility company. You need a phone. You need to get to work, so make your car payment. If you owe child support, paying that is necessary not only for your child, but also to keep you out of jail. Medical emergencies also fall under this category.

2. Uncle Sam: File your taxes on time! This will prevent you from paying penalties and interest of up to 25 percent of what you owe.

Student loans are often backed by the government. Just like back taxes, the government can come after these loans using methods that other creditors can’t use. The government could potentially seize your tax refunds and garnish your wages if you’re delinquent. In some cases, your Social Security benefits could be at risk also.

Fortunately, there’s a lot of flexibility regarding the payment of student loan. If you’re unemployed, going back to school for an advanced degree or experience other financial hardships, options exist to defer those loans or stretch out (thereby reducing) the amount owed.

3. Everything Else: This category includes all of your other debts – debt from bank-cards, department stores, and payments for furniture and appliances. Don’t misunderstand – you still have to pay them. You borrowed the money; you still should be responsible for that debt. But if you’re in a situation where you know you won’t be able to pay every creditor right away, these are the debts you put on hold.

Step 1 Summary

You now know how much money you really have because you:

• charted your debt
• requested, read and understand your credit score
• and prioritized your debt so you know what needs to be payed first

Congratulations! That’s the end of Step 1.

Now you’re ready to go on to Step 2: Track Your Spending and Find Extra Money to Pay Down Debt

or go back to the home page

Top Debt Resources

• myFICO credit services
• Lexington Law Firm
• Instant Online Debt Consolidation – Free Quote!