Your Get-Out-of-Debt Checklist

A new year is upon us. Now is the time to make a brand new start. However, if you’re like most consumers, more obligations are probably putting a damper on the celebration. According to Experian, the average consumer owed more than $4,200 in credit card debt at the end of 2010– much of which came from financing the holidays–and it can take more than a year to eventually get rid of those bills. If you’re struggling with a mountain of debt, here’s a checklist for regaining control.

Keep tabs on your credit utilization.
A credit utilization ratio is a calculation used by creditors that measures how much credit you’re using compared to how much you have available. The more unused credit you have, the better. Your credit utilization accounts for 30% of your score.

Stay in contact with your lenders.
If you find yourself in a tight spot and you don’t think you’ll be able to pay your bills on time, contact lenders immediately. You might be able to work out a payment plan.

Devise–and stick to–a budget.
Knowing exactly how much money you have available will help you manage your finances.

Cut the fat.
Once you’ve devised a budget, identify areas where you’re overspending. Cut back or eliminate those items.

Pay off high-interest debt.
Once you’ve paid off those bills with the largest interest rates, apply your dollars toward your next highest debt and so forth. This way, you’ll get rid of high maintenance fees faster.

Use cash whenever possible.
Paying for items with actual dollars from your wallet will make you think twice about creating new debt.

Add income.
If your belt can’t get any tighter and spending less isn’t helping much, find a way to make more money. Now is the time to look for a part-time or freelance job.

Seek help from a certified financial planner.
A CFP can help you identify areas where you need to improve and assist you with reaching your goals. Some planners will conduct the first session for free or at a reduced cost.