Perhaps more than ever before, consumers are finding themselves deeper and deeper in debt. According to U.S. government figures, household debt has surpassed $2 trillion in this country, exclusive of mortgage debt. For that reason, debt consolidation has become a very popular topic of discussion. While getting debts under control is clearly important to every individual, some other considerations can be more important.



Basic debt consolidation calls for rolling all of your debts into a single monthly payment. Home-equity loans, credit card payments, mortgage debt and car payments can all be lumped together and paid to a single lender. Both traditional banks and online lenders offer this service, and there are several options for the consumer to consider, though the ultimate goal should always be lower total monthly payments, lower interest and more spending money at month's end. Consumers with more affordable monthly payments and, thus, more money at the end of the month may be able to get out of debt more quickly.

Realizing that any extra money can also be applied to reducing debt often eludes many consumers. Reducing debt, not just lowering the payments, should always be the goal. Every dollar applied to debt is one that won't have to be paid in the future.

Poor spending habits are often what necessitate debt consolidation in the first place. People doing a good job managing money don't need to consolidate debt nearly as often as those doing a poor job. Often, those same bad habits reemerge after a consumer does consolidate debt; with financial pressures reduced, they go on a spending spree they cannot afford. The lure of empty credit cards often leads those consumers to go further in debt.

So while consolidation is a step in reducing total debt, changing bad spending habits is the most important thing. Simply put, you have to stop spending money that has not yet been earned.

Perhaps the easiest way to do this is to eliminate credit cards, which are among the leading causes of consumer debt. Avoiding new loans is another necessary step. New loans include any purchases made to be paid for at some point in the future, such as new cars or other big-ticket items.

What is important is the continued reduction of debt. Without taking steps to reduce debt, debt consolidation itself is worthless. Experts recommend a debt-to-income ratio of 36 percent. That is, your total monthly debt should be less than 36 percent of total monthly income. Many people are surprised by the result after they have done the math, and the debt-to-income ratio can serve as a serious reminder of the consumer's real financial resources.

While is a beneficial tool for consumers who find themselves in financial trouble and bad credit, smart consumers know that awareness and good spending habits are actually the best ways to get out, and stay out, of debt. Merely consolidating all your payments into one lump payment per month is not enough.