Debt Consolidation Credit Counseling In Phoenix

Debt continues to be a huge problem in our American society. Many of today's retailers no longer sell products rather they sell credit. If a retailer can successfully sell credit to the consumer alliance then the margin they stand to gain is significant.

Think about it. When we set out to purchase a car it's seldom that a bottom line price is offered. The tone of the negotiation turns instead to payments, low down payments, low monthly payments. What's being offered is credit. The dealership's profit will be made in the financing of the automobile. The purchaser gets a seemingly attractive deal, and goes more into debt as a result.

Now that we have all been victims of this approach by retailers and credit card companies, how do get out of this debt? Where do we start? I am going to explain to you the snowball effect to eliminating debt.

The first thing you need to do is to make a commitment that you're not going to fall further into debt. This is a very necessary step. If the commitment is not there the subsequent steps will likely not work. One very simple truth is that you can never borrow your way out of debt,yet many try to do just that.

Second, once you've taken that all important first step you need to set some money aside in what we'll call your emergency fund. Put money into a savings account. Three months of income would be a good goal but you may have to settle for a bit less at first. This is money you use for emergencies only and is there for your use as opposed to going into debt to pay for an emergency. It's really a type of insurance against incurring further debt.

In the third step you really begin working to eliminate your debt. A very good approach is to start with your lowest debt balance first and work to get that balance paid off. A retailer's credit card may have the lowest balance and would be the logical first debt to attack. Next might be a major credit card followed by what you owe on your car. The biggest and last debt to be worked upon is more than likely your home mortgage.

When a smaller debt balances is paid off you take the amount you have been paying monthly and apply it to the next smaller debt. Now you're paying the minimum payment plus the amount you've paid on the previous debt plus anything more you can afford. Soon this debt will also be paid and you apply the same process to the next smallest debt. This is the snowball effect. Soon you're making meaningful debt reduction payments on your largest debts, probably your home mortgage.

Two very good reasons for starting with the smallest debt balance is that it's the easiest to pay down plus you get an emotional boost from gaining a small victory. You'll soon find yourself with a set of behavioral patterns geared to getting out of debt rather than going in to debt. It's important of course that while your busy building your snowball that you continuously strive to keep you spending in check. You'll find this process very satisfying indeed and it works!