The process of debt consolidation begins by taking a look at your outstanding debt. This is something every person or couple should do before considering going for some kind of debt consolidation loan or other debt relief.

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There are three ways you can do this, but each way will initially use the same steps towards helping you determine what your debt load is. These three are:

* Consumer Credit Counseling – Every large community in America has free credit counseling where you can get help in taking a look at all of your debt to help you determine what you need to do next

* Budget Manager – there are people who will help you with your budget and give you a plan that not only helps pay down bills, but helps you learn how to build up your bank accounts if possible

* You do it yourself – this is a viable option if you have any confidence in your own abilities. You can go to sites like the National Foundation for Credit Counseling, which has budget calculation sheets and consumer tips to help you out.

If you’re going to do it yourself, either using pre-made sheets or formats or just creating something in a program like Excel, there’s certain information you’re going to want to take a look at. Using Excel or a calculator will help you with some of it.

The first thing you want to take a look at it your income; this is the same process as budgeting. For most people, this will be the same dollar amount every week or two weeks. You want to look at what you actually bring home, not your gross amount before taxes. Multiply it by two, since most months you get paid twice. Twice a year you actually get an extra payment if you budget this way, but you don’t want to look at that initially.

The second thing you want to take a look at are any bills that are monthly, that don’t have an associated interest rate. These would include things like utility and phone bills, cable, and car insurance, possibly rent.

The third thing you want to look at are those bills that do have interest rates associated with them. These would be things like credit cards and mortgage bills. This is the one where Excel will come in handy later on, mainly for credit card debt, because you not only want to look at what your monthly payments are, but you’ll want to calculate your interest rate as it pertains to your outstanding balance to determine how long it would take you to pay off each card if you only made minimum payments.

The fourth thing you want to look at are those bills that aren’t monthly, yet are bills you need to pay when they come due. This could be things like car insurance if you don’t pay it monthly, or water bills, which usually come quarterly. They don’t fit within your initial budget plan, but you need to note them because they’ll be expenses to be considered at a later date.

What all of these steps do is help you determine what your outstanding debt is, and how it relates to your income. There’s no reason to begin debt consolidation processes without this step, whether you do it yourself or with help.

The main thing you want to see is if your pay comes in higher than your bills. If it does, even a little bit, then you’re ahead of the game, and you may not have to do anything overly drastic. All you might need is a part time job where you can earn an extra $50 to $100 a week for awhile, put yourself on a budget so that it’s all you need for food and weekly gas, pay your bills, and look for ways to pay off some of your bills, especially your credit cards, so that you can have some extra money. Maybe cut down what you get on cable, or change your phone plan. With creativity, you’ll find ways to help cut expenses while bringing in more money.

If you’re behind, this is where someone like Consumer Credit Counseling can help. If you don’t know how to do it yourself, they can help you negotiate lower payment rates on some of your outstanding debt, which will leave you money to play with. Of course, in these instances, your credit cards are totally frozen.

The most important thing about looking into your debt consolidation options is taking the action to find out where you are. It’s always better to know what your situation is because you then have the chance to correct your problems and ease your mind.
 

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