With all of the information and suggestions about your finances how do you come up with a plan for debt management that works?

When it comes to how to handle your money it seems everyone has an opinion. The problem is that many of the suggestions come from companies that want you to pay them to help you with your debt management problem – which often puts you further in debt. The truth is that most people don't need a debt management agency, they don't need some textbook advice, and they don't need to pay for a plan. Most people just need someone with common sense and experience to give them a plan for debt management that works.

One of the major reasons why people have trouble getting out of debt and staying out of debt has more to do with their perception and viewpoint than it does their income or lack of it. Honestly, most people are looking for a quick fix that allows them to go back to their previous way of life as soon as possible. It is not unlike the yo-yo dieter that diets to get to a certain healthy weight and then returns to his old, unhealthy eating habits. Pretty soon he has gained all the weight back and sometimes a little more.

In the same way people who are in debt often will be forced to go on a crash diet that allows them to pay off debt and then once they have paid it off they return to their old spending habits, and end up deeper in debt than they were at first.

Or consider the person who gets a debt consolidation loan and then uses the now empty credit cards for more purchases. Not only do they have the original debt, they have doubled it.

Most people will not live on a certain amount of money, they will live on a percentage of their income. Someone that is frugal and lives on 90 percent of their income when they are making little money will continue to live on 90 percent when they are making a large amount of money. By the same token, someone who is living on 120 percent of their income when they are making a little money will continue to live on 120 percent of their income when they are making a lot of money. It is only when you change your spending habits that you will be able to manage your money.

If you want to know what percentage of your income you are living on then figure up your expenses every month, including credit card debt, entertainment, and that Snickers Bar you buy on the way home from work every night. Compare it to your net income. Now divide your expenses by your net income. This is the percentage you are living on.

Monthly expenses = 2,500

Monthly income = 2,000

Living on 125 Percent of income

Monthly expenses = 1800

Monthly income = 2,000

Living on 90 percent

The goal is to be living on less than you make. No matter If you are making $20,000.00 a year or $40,000.00 a year living on 125 percent will get you ever deeper into debt while living on 90 percent will make you prosperous.

If you don't understand the concept go back and read it again as many times as you need to.

Now the time comes to figure out what your budget should be. You absolutely must live on less money than you bring home. This may be a difficult concept for some but this author's family of 10 has consistently lived well on between $20,000.0 and $30,000.00 per year. It can be done.

Write down your take home pay. That is the money that you get every month after all the taxes and insurances are taken out.

Subtract ten percent from that. If you are Christian and you tithe subtract fifteen percent. The money that is left is the money you have to live on. The ten or fifteen percent that you removed goes into a savings account every month or into tithes and savings, depending on your beliefs.

Now, write down all the expenses that you have that cannot be controlled. These would be:

• House payments
• Car insurance payments
• Credit card bills, etc.

Now write all the expenses down that you can shave if you need to. This would be:

• Food
• Electric (maybe you need to turn the air conditioning down or off?)
• Gasoline

Once you get your budget done if it all balances out – great! If it does not balance you will need to trim the areas that you can. Keep in mind that this is not forever, it is an emergency situation that you are in control of. You are choosing to take control of your debt.

If you still can't balance it you may need to find income in order to help.

• Have a garage sale
• Sell your car and buy a less expensive one
• Forgo hair cuts for awhile
• Start shopping at thrift stores
• Use the library rather than Barnes and Noble
• Cancel cable
• Cancel the cell phone if you can without a penalty
• Sell items on eBay
• Sell crafts online
• Take a second job
• Tutor

There are really hundreds of ways to add to your income, you just have to think outside the box.

A couple of decades ago people needed credit cards. They were convenient, you didn't have to carry cash on trips, and you could use them to place mail orders. With the advent of the Internet, electronic checks, Paypal, and debit cards this is no longer true. So right now you have to stop using credit cards. If you are reading this you have a debt problem. Credit cards are to you what a gin and tonic is to an alcoholic. Get rid of the cards. If it makes you feel more secure you can keep one of them for emergencies but it can't have more than a $1,000.00 limit on it and it must be used only for real emergencies.

Now there are two possibilities.

If you can afford the payments on your debts begin to pay minimum payments every month. When you get a little extra money put it on the card with the lowest balance. When this card is paid off, begin adding the amount of this payment to the regular payment on the credit card with the next lowest balance. And so on...

If you can't afford the payments you will need to call the credit card companies and try to work something out. Often they will put a freeze on your account and allow you to pay a hardship payment at a reduced rate and interest rate. If not you may need to write a letter and require it be signed for. State your problems, your willingness to pay and your need for a lowered payment. They may work with you, and they may not. This is no different than what the consumer debt management agencies will do. They will look at your income and your expenses and try to renegotiate the terms of your credit. It doesn't always work.

If the credit card company won't work with you then they will send it to collections. Offer the collection company an amount you can afford. Make this offer in writing, again making sure your letter is signed for. If the collection company won't work with you it may be written off as a bad debt. This is not the best thing but it certainly isn't the end of the world, either.

Home equity loans can seem like a great way to consolidate your debt at a lower interest rate. They aren't. They tend to pull you further into the debt trap by freeing up credit cards for you to use again. You can lose your house if you default on a HELOC (home equity loan). No amount of harassment by a bill collector is worth losing your house over.

Determine to get out of debt and stay out of debt. It may take a few years and it may be difficult. Once you get out of debt, and you will, you will have the techniques to use to make sure you never go back there again.

Debt management help is no good when it doesn't work. This plan is one of the most difficult things you will ever do but it works. When you take responsibility you also take control of your life.