The Unique Finance Blog

When you feel like you’re drowning in a never-ending sea of debts, it can be very difficult to take a really close, hard look at the actual dollar amounts. As strange as it might seem though… not knowing the exact dollar amount of every debt you owe can make the problem seem much bigger than it might actually be.

And the first step to solving any problem, is knowing exactly what the problem is… and how bad it is too.

So if you’re ready to start reducing and eliminating some of your worst debts, the first thing you’ll have to do is take stock of every debt you owe. Pull out every single bill - whether it’s a back due bill, a collection notice from past debts you haven’t been able to pay yet, loans you currently have open, and so on - pull them all out and get ready to take full stock of your debt problem.

Now doing this step is critical. As I said before, you can’t fix a problem if you don’t know the full scope of that problem. So when you start looking over every single debt you owe, don’t forget the mundane every day things. Mortgage payments, car loans, credit card balances, store lines of credit, and even ongoing contracts you may have such as your cell phone obligations.

For the purpose of debt reduction and elimination, you shouldn’t include regular monthly bills as part of your debt obligations. Why? Because those are never paid off. As long as you need and use those services, you’ll continue to be charged for them. These types of bills include electricity, water, and home telephone services.

Are you ready? Pull out every single debt you have, and start listing them all on a single piece of paper. List who the debt is owed to, or simply name the debt something you can easily remember. Then list the total dollar amount for that debt right next to it. Be sure to list the exact dollar amount too - including change if it’s applicable - because the goal here is to know exactly how deeply in debt you are.

If any of your debts have interest rates attached to them - such as credit card debts and car loans - list the interest rate that debt is being charged. This tells you how expensive the particular debt is, and this will be important in future debt reduction steps you choose to take.

Once you have every single debt listed on that single sheet of paper, pull out the calculator and add them all up. Ignore the interest rates for this step, just add all of the current debt amounts together for now. This will give you the exact total of all debts you owe. You’ll see precisely how deeply in debt you are.

It may look better than you’d thought or it may look worse, but doing this one little step will make a huge difference in helping you to start a feasible, workable plan for reducing your debts… and possibly even getting completely debt free in the future.

© 2006, Kathy Burns-Millyard. For additional steps to reducing your debt, please read the free online guide: “How to Manage, Reduce, and Eliminate Your Worst Debts” at Find-Debt-Help.com