It's never pleasant to realize that you're in financial hot water, but pretending the situation doesn't exist is NEVER the way to deal with the problem. If you're having trouble meeting monthly payments, find yourself borrowing or using credit cards to meet daily expenses, or have one or more of your credit accounts turned over to a collection agency, it's time for you to get proactive and bring your debts back under control. Below you'll find five ways to reduce your debt. Some take time, all take some level of commitment and effort - but it's worth putting in the time to start cleaning up your debt situation.

1. Develop a budget - and stick to it.

The first step toward getting control of your finances is to realistically assess your situation. Sit down and draw up a budget that takes into account all your income and expenses. First, list all your income. Next, list each of your 'fixed expenses', the ones that don't vary from month to month. Those may include your rent or mortgage payment, your auto loan payment, and your utilities if you're on a budget plan to pay for them. Next, add in necessary expenses and payments on bills that vary from month to month. Finally, list all your daily and regular expenses for entertainment, transportation and the like. Your goal is to develop a budget that lets you meet all of your monthly fixed expenses, and figure out where you can cut expenses to start paying down your credit card and other debt.

2. Contact your creditors.

Communication is one of your best tools to help you through difficult financial times. Your creditors would really prefer NOT to take stronger measures to collect the money that you owe them. After all, it costs them more money to refer your debt out to a collection agency. As soon as you know that you're having trouble making ends meet, call your creditors and explain the situation. In most cases, they'll be happy to work out a modified payment plan that will make it easier for you to meet monthly expenses. It may mean extending the period of your loan, or renegotiating the terms of a loan agreement, but in the short run, it will take the heat off and in the long run, it will save your credit rating.

3. Pay down your highest interest loans.

Pick and choose among your credit card payments and loans. While it's generally not a good policy to pay only the minimum payment on credit cards and revolving loans and lines of credit, there is one exception. If you have one or two high interest outstanding loans, one of the better ways to get control of your debt is to eliminate them as quickly as possible. By meeting the minimum payments on other debts for a few months, you can concentrate on bringing the balance down on your most expensive loans.

4. Transfer your balances to lower interest loans and lines of credit.

If you have outstanding debt in high interest loans and credit cards, your finances can benefit from moving the balances to a lower interest credit card. Credit cards with 0% introductory rates for six to twelve months are widely available right now, as are low interest balance transfers. Take advantage of one to transfer a high interest loan and pay it down during the introductory period.

5. Get a debt consolidation loan.

A debt consolidation loan makes sense if you are paying on several different debts with varying interest rates. By taking out a home equity loan, second mortgage or other secured loan in the amount of your total debt, you can pay off all your other creditors, and have one monthly payment to deal with. By using a home equity loan to consolidate your debt, you take advantage of a longer payment term and lower interest rates to bring down your monthly payment and free up your resources for savings and other investments.