Bankruptcy and financial stress are at an all time high. In increasing numbers, people are turning to bill consolidation loans and debt management counseling for relief. Both debt consolidation and management provide valuable assistance. However, you need both for maximum results.

Many people claim that easy credit is the underlying problem. That mindset is half the problem. It is true that credit is easy to obtain. However, each person must accept responsibility for how they choose to use their money.

The misuse of finances can be an addiction, just like drugs or alcohol. It can also result from lack of understanding. Regardless of how the debt occurred, once the person can accept financial responsibility and commit to change, the road to a debt free life is possible.

Bankruptcy is not a good alternative. It will only cause more stress and financial problems for many years to come. So, with a little determination and resolve, lets examine how to get a handle on your finances and what you can do to reduce financial stress.

Debt Management
Debt management is very important. It helps you understand how to get a handle on your finances. Here are debt five debt management principles that work.

1. Debt Management Counseling
It is usually important to get an outside, objective opinion on your financial situation. A debt management counselor can help you organize your current financial status, offer honest and objective advice, and provide a road map for you to pay off your debts.

You should feel comfortable in talking with the counselor. The counselor should have your best interest at heart. However, you may not like everything you hear. Talk to several different counselors before you commit to one. Learn as much as you can about him/her. Youre looking for someone with a proven track record. Someone that will listen carefully to you and then offer specific advice that will best meet your financial situation. If they dont listen, are not honest and objective, keep looking.

2. Follow Budget
Part of your road map to a debt free life is a budget. Your budget should allocate sufficient money for your living expenses and your debts. Be diligent in following your budget. The more you write down and record your financial transactions, the more likely you are to stay on track.

To be successful at reducing debts, pay your debts first. When you pay your obligations first, then you know exactly what you have left to live on.

Some people take envelopes and put money in them for each item on the budget. When the money is gone, the budget category is used up. The only way to use more money for a specific area is to borrow it from another envelope.

Others like to use a software program for their finances. They record each item and put it in a specific category. Then, their reports let them know where they stand on each budget item.

It really doesnt make any difference how you use your budget. The important matter is that you have a budget. You know how much is in each budget category at all times and you dont spend more money than you have budgeted.

3. Get Rid of Credit Cards
Successful debt reduction is primarily dependent upon not increasing your current debt. Many debt management companies will be able to work out arrangements with your creditors for reduced payments and interest. As part of the agreement, you agree not to accumulate more debt. Tearing up your credit cards is a good idea. Get rid of the temptation to increase your debt.

4. Consciously Reduce Expenditures
Once you become aware of where your money is going, you can begin to eliminate unnecessary expenditures. For example, when you leave the house, do you turn down your air conditioning or heating? Do you turn off lights and appliances that are not being used? How much would you save by taking a sack lunch to work rather than eating out? If youre a smoker and gave up smoking, how much would you save?

Youll find that small reductions in a few expenditures will begin to add up. The more you are aware of where your money is going, the better you will be able to reduce unnecessary expenditures.

5. Focus on Debt Payment
Each of your debts will have a different interest rate and amount. Individual personalities tackle problems in different ways. You need to figure out what is the best method for you.

For example, some people concentrate on paying off their most expensive debts first. It saves money in the long run. They figure out the maximum amount they can pay each month on their most expensive bill. Once that is paid off, there is a huge relief in cash flow and stress.

Others have so many different debts. They choose to pay off as many little ones as fast as they can, so they can concentrate on the bigger debt.

It really doesnt make too much difference what method you choose. The important point is that you have a focused plan you feel good about. Good debt management, in contrast to bad debt management, is being consistent over time.

In part 2, we will discuss how use the financial resources you have to consolidate your debt.

Larry Andrew founded and operated his own educational consulting corporation for over twenty years. He has extensive experience in teaching, business and finance. He is the publisher of http://www.bill-consolidation-loan-help.com.