How to reduce debt 

Almost everyone has some type of debt that they would like to reduce and get rid of. The problem is that most people view their money emotionally instead of rationally, and find it hard to stick to a debt reduction plan. I like to use a debt reduction to help me reduce my debt in a rational, goal oriented way. If you view your debt rationally and stick to the debt reduction plan, you will reduce your debt. Here is how you do it.

STEP 1 - The first thing we want to do is identify the highest interest rate you are paying in your debts. So make a list of all your debts and order them from the highest interest rate to the lowest interest rate.

STEP 2 - Now you want to look at all of your income and compare this to your debt. Do you have enough left over to set aside each month to go toward paying your debts? Be realistic about this amount and do not strap yourself each month for necessities like gas and food.

STEP 3 - Specify what that amount of money will be to go toward paying your debts each month.

STEP 4a - Once you have established the extra amount of money you have left over each month, make the minimum payment on all debts.
STEP 4b - List your debts from the lowest to the highest balance, and apply your money toward paying off the debt with the lowest balance first (shortest term) and then moving up the list. This works really well if you have debts with an equal or near equal interest rate.

STEP 5 - When you finish paying off the debt with the shortest term, reassess the extra money you have coming in each month and pay down the debt with the next shortest term in the same manner.  Continue using at least the same amount of money for debt reduction. i.e. continue to allocate the same amount of money towards debt reduction as in step 4b.

STEP 6 - OPTIONALLY: You can list your debts from the highest to the lowest interest rate, and apply your money toward paying off the debt with the highest interest rate first and then moving down the list.

NOTE: Using the plan above provides the psychological boost of seeing your debts eliminated.  Paying off debts with the highest interest rates first save you more money, however, if the interest rates are significantly different.