When a person accrues debt, it isn't just what they borrow that they have to pay back, there is compounding interest that needs to be paid as well. This is how the credit and lending industry can make money on loaning their money out.

Controlling your debt is your responsibility. No one is going to throw you a lifeline unless you start seeking one on your own.

There are lots of things that you can do on your own to help your financial situation. Handling and paying off your debt can be an important lesson for any children you have in your home as well; set them up to be responsible consumers.

Track and Control Your Spending

Before you even get started on your debt reduction plan, you need to take a good look at your spending habits. If you spend more than your income then the difference between your spending and your income will be added to your debt.

This type of spending can create and add more new debt into your debt balance month by month and quickly it will snowball into a big debt ball that will crush you and your family; it is a serious trap. In order to control your spending, you need to understand where your money is going.

When you itemize where you are spending your money, you are then able to see the places that you could have avoided spending money. You might actually even be surprised at how much you spend each month on coffee, movies, or lunches out.

List all of your expenses and categorize them into "must spend" such as your rent or mortgage, utilities, insurance, and food. List all non-essential spending such as for entertainment, clothing, and vacations.

As I mentioned above, you will be surprised at how much goes to non-essentials. So the trick is that you need to eliminate those non-essentials so you can put that money towards your debt.

Stop Using Your Credit Card

There are research results that show that most American households are in debt due to uncontrolled use of their credit cards. Credit cards are convenient and easy to use and are so very tempting for most people.

Credit card balances usually add up very quickly and then people are surprised at how much they spent when they receive and review their bill. Now, it can be better for your credit score to pay your cards off but to leave them open.

If you are a person that cannot control yourself if you have a credit card in your home, then cut them up so you cannot use them. If you ever had an emergency where you needed it, you'd have to call the company and have them send you a new one.

Or you can have someone you trust hold onto it for you. That helps ensure that it isn't within easy reach.

So a good alternative to using your credit cards is using a debit card, so you can't spend more than what you have in your checking account. It is a good idea to put your credit cards away so they are not so easily accessible in your purse or wallet.

Spend Less & Save More

Once you've removed all plastic temptation, the next thing you must do is to cut down your expenses so you can add more money to your monthly payments. For instance, be frugal when shopping; do you really need that pair of sunglasses?

Even if it is only $5 here and $10 there, that can really add up. Look for things second hand and that can save you a lot of money.

It will take some sacrifices but in the end it is really worth it. For instance, some couples decide they are too busy to watch T.V. so they get rid of their $55 cable bill and add that to a credit card.

A big key is to pay your debts one at a time and to start with the lowest balance. It really makes sense to pay off the highest interest debt, but when you pay off your lowest balance, you see the results more quickly and the snowball effect takes off.

Keep paying the minimum payment on all your other debts. With money you have saved from eliminating non-essentials, you can add a certain amount to your minimum payment towards your lowest balance.

Be it $20 or $100 extra per month, keep it the same so you know how fast you can pay off your bills. Then once that debt has been paid, take that entire payment and add it to your next lowest debt. It will look something like this:

ABC Credit Company
Minimum payment $20
Added payment $50
= monthly payment of $70
Once this is paid off then take that $70 and add it to:

123 Credit Company
Minimum payment $40
Added payment of $50
Minimum payment from ABC Credit Company $20
= monthly payment of $110, so on and so forth.