Posted on October 22, 2009 at 3:06 am If you are serious about getting rid of your debt, budget planning can play a crucial role. By planning the budget and implementing your plans, you can avoid extra costs, which can reduce your debts quickly. Prepare a budget plan If you are finding it difficult to manage monthly expenses on the debt, structure a budget plan taking into account all the expenses. For example, start with your mortgage payments. Discuss the case with your mortgage company and get the interest rate as low as possible or refinance your house if you think it is feasible. It is interesting to note that some homeowners even reduce their interest rate by 2% when they refinance or negotiate with the mortgage firm. Extending the term of mortgage loan to 40 years can reduce the monthly payments as well. Prepare the budget plan in such a way that the monthly mortgage payments stay within 31% of the gross monthly income. In addition, take care that total bill payments do not exceed 45% of your income. List all the expenses Make a list of all the debts on your portfolio and calculate the total payment needed. Consolidation of the amount you owe on each credit card into a single account may lower the percentage, which will facilitate the management of credit card expenses. To know how much you owe on each of the cards, either check the credit card statement or visit websites of the credit card issuers. Take the pain to note down the interest rates of each credit card along with the amount owed. Each month, pay in excess of the minimum amount due. This will help shrink the total amount due within the expected time. Begin paying off credit card debt starting with high interest rate card going down to lowest rate credit card. If it is possible, transfer high interest rate credit card debts to low interest rate credit card debts. This will lower the total amount you pay and make the payments easier. Furthermore, instead of closing the account by paying it off completely, keep it with zero balance as it will have a positive effect on your credit rating. Thus, planning the budget, listing down the expenses and managing the payments will help you shrink the debt over a short period of time.Source: Money Matters