If you are like most Americans, you are probably drowning in debt. In fact, recent data indicates that the average American is currently drowning in more than $9,000 worth of credit card debt. Even if you are one of the lucky few to be in a below average amount of debt, any debt is too much. The longer you are in debt, the more money you lose in finance charges. Therefore, becoming debt free should be at the top of your priority list - no matter how much debt you are in.



In order to become debt free, you need to first take control of the debt you already have. To take control, you might need to consolidate your debt onto one card. By transferring your debt to one card, you can effectively lower your interest rate and reduce the amount of finance charges you pay each month.

When it comes to consolidating your loans, it is better to avoid transferring your credit card debt to a home equity loan. Although home equity loans offer lower interest rates, you are putting your home up for collateral if you default on the loan. By keeping the debt on credit cards, you don't have to worry about losing your home if you fail to make your payments. So, unless you are absolutely certain you will be able to make the payments, you should keep the debt on your credit cards.

Simply transferring your debt from many cards to one is not the only step it takes to becoming debt free. After all, it doesn't matter what your interest rates are if you just keep adding to your debt. The first step in budgeting is to sit down and take a look at your current financial situation.

Monitor your spending habits for a month to see where your money is going. You may be surprised to find that you are spending a substantial amount of money on things that you really don't need. Cutting out that $3 cup of coffee each day, for example, can save you $90 per month. If you can make it by without that cup, or if you can make your own coffee in the morning, you can apply that money toward your credit card and begin the process of becoming debt free.

Once you have determined the things that you need and the things that you don't need, create a budget that will allow you to pay all of your bills on time. Then, plan on sending the remaining money to your credit card every month to pay off your debt. And, if you happen to come into some extra money, such as in the form of a bonus from work, send that to your card as well. Strive to pay more than just the minimum monthly payment each month and, before you know it, you will be debt free and financially independent again!