On December 9th I blogged about being cautious of debt negotiators. Consumer counseling services are agencies that are a great alternative to debt negotiators. They help people deep in debt for free (or perhaps a slight fee) by setting them up on a payment plan based on their income and expenses. The result is that the debtor pays their debt off themselves as opposed to the debtor paying the debt settlement company which in turn, pays the creditor. Consumer counseling agencies are easy to find by Googling for one in your area.

Does that sound too good to be true?

If you don’t feel comfortable opening up your entire financial story to a stranger, whether that be a consumer counselor or a debt negotiator, perhaps you’d like to try your hand at creating a plan all on your own. If it sounds like a herculean task, it really isn’t.

Let’s start with your income. This is what you get to spend. Notice, I said GET. You don’t have to. What you don’t spend, you get to save.

Next, list all your debt balances and what you can afford to pay on each of them, which should be more than the minimum amounts. One great theory is to pay the smallest balance first; when that is paid off, use that money to the next highest balance and so forth. The key is to have enough left over for your expenses, such as housing and food, which is the next step.

Now, list all your expenses. If your expenses and your debt payments exceed your income, then you need to reduce those expenses that you can. Obviously, you can’t eat less, but perhaps you may eat out less often, which can be five times the price of eating at home. Think about driving less when you’re not at work, (you shouldn’t be driving during work, unless it’s part of your job), less visits to Starbucks, less spending on clothes, or, well, you get the picture.

Now you’re on your way to paying off your debt without seeking the assistance of a debt negotiator or a consumer credit counselor.

For an alternative to developing the above plan, please see Jennie’s December 7th post about a unique way to budget. Doesn’t that seem simple? Does this seem like a better alternative to going to a debt settlement agency or a consumer counselor?