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6 Steps to a Realistic Debt Repayment Plan

Not sure how long paying off debt should take? Here are a few things to consider

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A Consumer Reports poll points out that 53 percent of consumers used a credit card to pay for all or some of their holiday gift purchases. Also, about 14.1 million adults were still carrying debt in late 2011 from the prior year's holiday season.

See also:  Credit Card Payoff Calculator

If you're still struggling to pay off holiday debt or have other debts you've been carrying for some time, don't despair.

These six tips can help establish a realistic repayment plan that will get rid of your holiday and other debt sooner rather than later.

1. Tally Up Your Current Debts

Guesstimating and kidding yourself about your credit card bills won't make them go away.

Instead, pull out each and every one of your most recent credit card account statements and create a list so you can tally up your debts. If you've not yet received your latest billing statement from a certain creditor, call the company and ask for your most recent balance.

2.  Set Specific, Very Specific Goals

Don't make a generic promise or a haphazard New Year's resolution to "pay off the credit cards" this year. Be very specific about how much you are going to pay off and when that will occur.

Assume you have $1,200 in credit card debt. Four months is a reasonable amount of time to pay that off. Commit to paying off that $1,200 worth of bills by May 1. Pay the $300 a month (plus possible interest) that's necessary to become debt-free. Being very specific about your objectives can help you realize your goals that much faster – and might help you recover from holiday debt sooner than you think.

3. Hold Off on Additional Credit Card Spending

Give yourself a chance to get your budget back on track by stopping the debt cycle in its tracks. Eliminate credit card spending for at least two or three months so you can shift your focus to cash-based spending. Stabilizing your spending so that you're not accumulating more debt will make it much easier to stick with a debt payoff plan that actually works.

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4. Shop Around for Low Rates

If it's not realistic to pay off our holiday debt (or earlier debts) in just four months, but you think you can pay off your total debts within a year, consider consolidating your balances to a low-interest or zero-percent interest credit card. This strategy can help you save some money on interest charges and make it much easier to whittle down that balance.Just make sure you're aware of what the interest rate increase will be after the promotional period is over or you could be back to paying extremely high interest charges on the remaining balance. Check out websites like, a free credit card comparison site, to shop around for the best credit cards offers based on your credit rating and spending patterns.

5.  Return Unused Items

If you made a few too many purchases this holiday season, check the store's return policy and head on back for a return. Most stores will process the return by putting the balance right back on the credit card you used. Don't use the excuse of potentially gifting someone with the item. Just return it and lower your credit card bill.

6.  Rework the Budget

If you're determined to pay off your holiday debt within a few months, it may be time to revisit the budget. Re-evaluate your budget to see if you can eliminate any non-essential expenses, at least temporarily. This will free up extra cash that can be used for your debt payoff plan.

You might even consider taking on a part-time job so you can increase your income and use the extra funds to pay off bills and debts with ease. Reorganizing your budget – and your priorities – can help to keep you ahead of your finances after a holiday debt hangover.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. You can follow her on Twitter and on Facebook.

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