How to Pay Off Debt With the Income You Have

According to MSN Money nearly 435 of American households spend more than they earn and the average credit debt balance $8,000. In 2003, American consumers owed more than $1.9 trillion in consumer debt. Unfortunately, there is no magic solution for these outstanding debts other than to pay them down. As long as you are earning more each month than your outstanding payment obligations and necessary expenses, it is possible for you to pay off your debts with the income that you already have.

• 1

  Monitor and examine your spending habits. ITo pay down debt quickly, you will need to pay more than the minimum payment each month. By cutting out unnecessary or frivolous spending you will have extra money available to apply to your debt payments. Consider cooking meals at home instead of going out to eat or brewing your morning coffee at home instead of splurging on a latte. If you are creative, you can find a variety of ways to free up cash each month that can be applied to your debts.

• 2

  Create a budget for your family. Write down your total monthly income and subtract your mandatory expenses such as mortgage/rent, car, utility and minimum credit card payments. From the amount that is left, determine the amounts that you will spend on variable expenses such as food, clothing and entertainment each month. Ideally, you should have additional money left over after that can be applied to pay your debts off sooner.

• 3

  Create and implement the basic strategy for paying off your debt. Identify the debts with the highest and lowest interest rates or "APR". Pay the minimum amount due on all of your debts except the credit card or loan with the highest interest rate. Apply any excess funds that you have each to this debt until it is paid off. Repeat this process with the debt that has the next highest interest rate.