Tips on How to Reduce Debt
For many of us, the material world is a very tempting place. Like hungry children whose eyes are bigger than their stomachs, a growing number of Americans habitually purchase more than they can reasonably afford-- and one glance at the soaring count of bankruptcies nationwide confirms this.

Personal debt is comprised of everything from home loans to credit cards to educational expenses - and reducing these burdens is just as vital to your financial well-being as accumulating personal savings. In fact, not only does debt reduction make sound fiscal sense, it is an essential part of qualifying for personal, home or business loans. Lenders look closely at debt-to-income ratio when qualifying their customers, and if the gap between debt and income is too narrow, chances are the loan will be denied.

So how to reduce debt? The answer isn't rocket science-- it's just a dose of common sense mixed with a dash of will power. Here's the recipe.

• Resist temptation. This is a prerequisite for debt reduction. Before buying, stop and consider if the item you covet is really necessary. If the answer is a resounding "yes," then investigate alternate price structures from competing products or services. Is there a substitute that's just as good but not as expensive.

• Stop using credit cards and start paying cash. You might even consider canceling all but a few charge card accounts.

• Transfer high interest credit card balances to lower interest accounts. Take the time to research the competition. Your savings could translate into the thousands depending on how often or how much you rely upon your credit cards as a part of your lifestyle.

• Pay more than the monthly minimum required by your credit card company. If you're paying the minimum, you're accruing interest charges faster than you're paying down the principal. At that rate, your debt will be around longer than you will.

• Pay off credit cards with the highest interest rates first. Take a step by step approach toward eliminating your debt. List your cards by highest interest rate and then pay them off in order of the highest rate. If you have multiple cards and can't seem to get your monthly balance reduced, analyze the rates and try to work out a plan that allows you to make a dent in each card's principal.

• Consider a Consolidation Loan. Look into low interest loans that can be used to consolidate high interest credit balances. This is a popular loan category for people with multiple credit cards.

• Ease up on your IRA contributions. Consider cutting back on contributions to your retirement savings plan and use the extra funds to pay down debt. But make sure to first ask an account administrator if you can adjust your contributions in the future.

• Limit the use of your ATM card, or at least regulate its use. Most banks charge for cash withdrawals and these fees nibble away at your bank account.

• Look into debt-management counseling. If you're overextended, these no-cost or low-cost organizations can work deals with your creditors to reduce monthly payments and help put you back on track financially.

Finally, and perhaps the most important of debt reduction strategies, develop a specific monthly budget for you and/or your family. This plan should address a plan of action that eliminates spending on unnecessary goods and services. This might include foregoing those Friday night pizzas, a few drinks at the bar, your premium cable package - or even that morning cup of java. Developing a clear picture of your financial situation will help pinpoint the areas where debt can be reduced, and with it, the financial stress in your life.