Debt continues to be a huge problem in our American society. Many of today's retailers no longer sell products rather they sell credit. If a retailer can successfully sell credit to the consumer alliance then the margin they stand to gain is significant.



Let's take car dealerships as an example. Go to a used car dealership and see if they would like to talk bottom line price with you. I can ensure you that they will be much more interested in talking about payments than price free in five. The reason for this is they are selling credit.

Getting in to debt is so easy and really so convenient. The hard part, and it can be very hard indeed, is climbing back out. If getting out of debt is one of your goals, and it should be, you may be wondering how to do it and where to start. An effective method of debt reduction and eventual elimination is called the snowball effect and here's how it can work for you.

First, before you can even start putting the snowball effect into play you need to make a very firm commitment. You need to commit yourself to stop going deeper into debt. You can never borrow your way out. The only way out is to stop going further into debt and then begin to reduce that debt.

Second, once you've taken that all important first step you need to set some money aside in what we'll call your emergency fund. Put money into a savings account. Three months of income would be a good goal but you may have to settle for a bit less at first. This is money you use for emergencies only and is there for your use as opposed to going into debt to pay for an emergency. It's really a type of insurance against incurring further debt.

In the third step you really begin working to eliminate your debt. A very good approach is to start with your lowest debt balance first and work to get that balance paid off. A retailer's credit card may have the lowest balance and would be the logical first debt to attack. Next might be a major credit card followed by what you owe on your car. The biggest and last debt to be worked upon is more than likely your home mortgage.

Next you will want to pay any extra money in your budget to pay down that debt. Once you have the lowest debt paid off you simply take what you were paying on the lowest and add it to the minimum you were paying on the next lowest balance.

You will continue to do this until you methodically eliminate all of your debt. The reason we take the smallest first is that we want to gain momentum. This simple process is 90% behavior, which means it will only work if you learn to control your spending habits. Good Luck!