Guest Author - Rhonda Cliett

It is much easier to ignore your credit card debt and pretend that it is at a controllable level. However, if you are serious about taking control of your finances, then you must analyze your credit card debt and create a master plan to reduce the balances.

Step One
List each creditor, the amount of the current monthly payment, the total amount owed, and the interest rate.

Use this worksheet to help you analzye your credit card debt: Credit Card Debt Worksheet. (You will need the free Adobe PDF reader to view and print this form).

Step Two
Add the total monthly payment that must be paid each month. Next, add the total credit card debt.

Step Three
Rate your cards according to the interest rates. The card with a rating of “1” is the card with the highest rate. The card with a rating of “2” is the card with the second highest rate. Continue this process until you have rated each card. You can place the rating next to the interest rate of each card.

Step Four
Compare the amount you have available to pay towards your credit card debt (from step three of the Debt Reduction Plan), to the total monthly payments (from step two - above). The difference between the two is the additional amount you will pay each month on your highest rated card (from step three - above).

Example: Let’s say the amount you have available to pay towards your credit card debt is $500 and your monthly payments total $300. You now have $200 which will be used to pay on your number 1 highest rated card.

Once you have paid off your number one highest rated card, you will then take the additional money and use it to pay off your number two highest rated card. You will follow this pattern until all of your balances have been paid in full.

Summary
Depending on the size of your debt, this process can seem rather overwhelming and the goal can appear to be unattainable. DO NOT DESPAIR. You are not alone in this process of paying off your credit card debt. You need to own the good, which is your decision to take control of your finances, and let go of the past. Remind yourself that you are taking action and regardless of how long it takes to reach your goal, you will reach it.

Analyzing Your Financial Situation
Debt Reduction Plan

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