Debt levels can be overwhelming. Where do you start? What do you pay off first? Sometimes this can cause a person to do nothing at all.

An important question to ask yourself is why do I have all this debt? This might be an easy question to answer, as maybe your debt has increased due to a job loss or medical expenses. However, if your debt load has been increasing due to spending more than you make and living beyond your means, then one of the first steps is to stop using your credit cards. Use a debit card linked to your checking account or use cash. You will be more conscience of your spending and spend less if you feel ‘the pain’ immediately. Most importantly, you will no longer be increasing the balance on your credit cards.

Equally important is to determine where your money is going. It can be painful, time consuming or just plain boring, but tracking your monthly inflow and outflow of cash is a necessary step. After tracking your spending for at least two months – whether going over past records or keeping track going forward – you will have a clearer picture of what cash you have available to begin paying down debt. Most people find tracking their spending a liberating experience as it gives them a sense of control in regards to where their money is going.

After you have established your base monthly cash flow you should ask yourself where you can cut back. Can you eliminate certain items such as your unused gym membership? Or, going out to lunch or dinner one or two times less each month? Use these funds as extra payments towards your debt. If you were paying $100 a month towards your credit card balance, and now you are spending $25 less a month eating out, then increase the monthly payment to $125.

Finally, have a game plan as to what debts you will pay off and in which order. If you have more than one credit card or loan, this plan will be most effective if you begin tackling the card or loan with the lowest outstanding balance first, as opposed to the one with the highest interest rate.

For example, if your list of debts were as follows:

Take the additional money you carved out of your monthly cash flow (the example above was $25) and increase the payment on the loan with the smallest balance. So begin to pay $75 a month on the credit card up from the current payment of $50. If periodically you have extra cash in your monthly budget, whether from a bonus or from the sale of some personal items, apply that cash towards the lowest balance loan.   In this example you would continue to make the $30 monthly payment on the student loan and the $250 monthly payment on the auto loan.

When the credit card balance is paid off take the monthly payment of $75 and apply towards the next smallest balance loan. In this example the student loan payment would then increase from the current level of $30 to $105 a month – the current $30 payment plus the $75 you had been paying on the credit card. Add any additional funds towards this loans balance. When the student loan is paid off, apply that payment to the auto loan for total payment of $355 a month - $250 plus the $105.

It is not easy, but if you stop using your credit cards, monitor your spending and focus intensely on paying down one loan at a time you will quickly begin to see the results and start living a debt free life.