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Summary
If you have incurred substantial debt, you may want to consider these options to help reduce your debt: budgeting, debt transfer, debt consolidation, credit counselling from a reputable organization, working with your creditors or bankruptcy. You can then choose a debt reduction approach that works best for you, which may be any one of these ideas or a hybrid. The approach you use will likely depend on your level of debt, available funds, your level of discipline, and how quickly you want to get out of debt.

Possible Steps or Approaches
1) Budgeting. The first step towards taking control of your financial situation is to do a realistic assessment of your income and expenses. Work out how much you earn (your total income) and write this figure down. Then total your expenses. This is how much you spend each month for rent, fuel, food, clothing, heating, water, electricity and other bills. The difference between your total income and your total expenses is the amount of money available to pay your creditors or lenders.

Decide if there are any monthly expenses that you can reduce or live without. Focus on lowering your expenses so that you can increase your income. You'll be amazed at how many things you can do without.

Here are some MS Excel Samples that may help in budgeting and/or personal finance. These templates are offered just as free samples of what others have done and should be taken as examples only.

• MS Excel Sample - Consumer Debt Manager.
• MS Excel Sample - Family Monthly Budget.
• MS Excel Sample - Personal Budget.
• MS Excel Sample - Personal Financial Statement.

There are software programs and Website vendors out there that also help with much more sophisticated budgeting and personal finance tools (not free often).

• [SEE IF ANY AFFILIATES FOR MS MONEY, QUICKBOOKS, ETC)

2) Debt Transfer. Often used to refer to credit cards. This involves transfering your credit card debts (or balance) to an existing or new credit card offering a special promotion (like an introductory 0% interest rate for balance transfers). This is not likely to be a long-term approach, but may provide some temporary financial relief as you figure out a more long-term solution. After transferring the specified balance, make sure you keep up the repayments and then just before your 0% introductory offer is up, you can see if you are able to apply for another 0% card, transfer the balance over again before you starting paying interest – and repeat. With a good credit record, you could do this for years, moving your debt from one card to another until it’s paid off. Realistically, if you do not already have a good credit record, this may not be an option at this time.

3) Debt Consolidation. Debt consolidation involves using a new loan to pay off multiple debts. Often this consolidated loan is set-up for a longer repayment period. Your monthly payment may thus be lower because repayment is spread out over a longer period of time. This will usually eliminate the hassle of having multiple creditors, multiple bills, and multiple payments to make. It is very important not to take out any additional loans until your consolidation loan has been repaid.

One manner to consolidate your debt is by taking a loan out against your home (either a second mortgage or a home equity line of credit). Borrowing against your home is a cheap way to raise money, but it can definitely be risky. A loan against your home is a secured loan, that is if you can’t make the payments - or if your payments are late - you could lose your home!

However, you could replace expensive debts with a cheaper personal loan (unsecured loan). Before taking on new debts, you might want to check out your credit history. There are several lenders and debt consolidation agencies that offer consolidation loans. Check out the Listing of Lenders for a selection of some of these lenders.

4) Credit Counseling. Quite often, some people are not disciplined enough to create a workable budget and stick to it. If you can’t work out a repayment plan with your creditors and you can’t keep track of mounting bills, you may want to consider contacting a credit counselling organization or a financial advisor. Take a look at the Credit Counseling section for more information..

5) Contact Your Creditors. There are many of us who have struggled financially and due to a feeling of being overwhelmed, may ignore our debts and at times fear contacting our creditors. This reaction is normal, but will damage your credit record. Creditors or lenders may take action against you in an effort to get payment. If you're finding it hard to get your bills paid, be the one to contact creditors. They will be more willing to work with you. Work out arrangements that satisfy you both. Explain to each lender that you aim to repay each debt in full over time, but that they must accept reduced repayments for now. Decide how much you can pay them each month and set up a debt repayment plan.

One good rule of thumb is to contact your creditors when your credit payments (excluding mortgages) exceed 15-20% of your take home pay (net income). You can work with creditors to set up monthly installments that are more in line with your income.

5) Bankruptcy. Bankruptcy is when an individual (or organization) has legally declared inability or impairment of ability to pay their creditors. A declared state of bankruptcy can be requested or initiated by the bankrupt individual or organization, or it can be requested by creditors in an effort to recoup a portion of what they are owed. Read more on bankruptcies in the Bankruptcy section.

Conclusion
If you’re serious about reducing your debt you should try and stop using your credit cards and stop taking out new loans. To increase your income, consider finding a second job, renting out a room, sell extraneous items you no longer need, research to claim every government benefit that you qualify for and work on cutting down your expenses. Put enough money aside for emergencies, but use the bulk of your savings to pay off debt. Debts usually cost you far more in interest than you gain on your savings (even the best savings interest rate of 6-8% doesn't compare with credit cards' interest rate which can be anywhere from 12-35%). Also, if you have a fairly good credit record, you should transfer your debts to less expensive lenders. Finally, shop around for better deals for services and products that you use, so you can bring down your expenses and free up more money to use against your debts.