How to Create a Debt-Reduction Plan

Debt can be daunting, especially when the statements keep rolling in with no end in sight.

Paying off your debts isn’t going to happen overnight—especially when consumer debt totaled $2.5 trillion in the U.S. in December 2011–but you can speed up the process by strategizing a plan and sticking to it.

Begin your pay-down process by pulling a free credit report at AnnualCreditReport.com and ranking your debt in a spreadsheet by balance, rate, minimum payment and the number of payments left, recommends Denise Winston, a financial educator and founder of MoneyStartHere.com.

Once you have a spreadsheet, determine a fixed monthly amount you can pay to pay down your debt. If possible, this amount should be more than the combined minimum payments on all of your cards, adds Kevin Gallegos, vice president of Phoenix operations for the Freedom Financial Network.

Next, pick two or three target debts and plow as much as you can above the minimum payment on them, Winston says. “You will be amazed at how good you feel by simply knowing how much debt you really have and putting a plan in place to get rid of it.”

Experts warn that the debt-paying process differs with every financial situation, but there a few basic guidelines that can help reduce multiple debts in a timely manner.