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I speak from bitter experience here. I have had two debt consolidation solutions (see Step 5 below) and only had to get the second one because I messed up big time with the first. When I consolidated all my debts for the first time it was a wonderful feeling. Car loan paid off, credit cards paid off and when the zero balance statements hit my front door mat from Amex, Master Card and Visa it was like I had a new found power – spending power!

Within about a year and a half I was in a worse position than with the first consolidation loan – but I had another new car, new motorcycle, new TV, sound system blah blah. Did I need any of this stuff? Absolutely not! But I had the power….

Ok, onto the Steps:

1. Face Up to the Problem

Look just deal with it! You’re an out of control spending maniac! These are the kind of things I told myself when I decided to face up to the problem. Now shock treatment works for me but may not for you. It doesn’t matter what method you used but you must face up to the fact that you have a problem!

It’s not the credit card companies fault or the advertisers or your neighbours because they were bragging about their new go faster luxury car it’s YOU.

I found this brutal approach very helpful and it made me think carefully about the next step……………………………….

2. Analyse Your Spending Habits

Now I gotta tell you this is tough, but well worth it. This has to include everyone in the family and you need to develop a strategy to deal with everyone without them ripping your head off! You know like does your teenage daughter have to have five new mobile phone ring tones a week? Or do you need to eat out four times a week? Or do you have monthly subscriptions to things you no longer use? Hey guess what I had all of these and more. Take a look at your bank statements and credit card bills over the last three to six months and identify where all the money has gone. Also think about the last month and where you went that cost you money.

Don’t crucify yourself with this. We live in a world where we are faced with constant media hype to spend money we haven’t got. You are not alone but by doing this exercise you can feel proud that you are in the minority of people that actually knows where their money is being spent! Next you will need to…………….

3. Create Spending Priorities

It is virtually impossible to live in this world without spending any money so please don’t set a goal to do this as you are likely to fail miserably. The best thing to do is to agree what you have to spend money on such as mortgage / rent, food, travel expenses, existing debt commitments, specials such as Jenny’s birthday etc. You can do this for the months ahead, looking at regular essential payments and planning for some contingencies like emergency car repairs. Now it’s time to……………..

4. Create a Budget - a Debt Consolidation Agency Can Help