If you’re in debt, you’re not alone. Sometimes it’s hard to know – or admit – if you have a problem with debt. It can be overwhelming to realise you’re in over your head, and to worry you won’t be able to pay back what you owe. The key to getting out of your situation is to act now. Don’t procrastinate. Taking charge of your finances and creating a plan for tackling your debt will cut down your anxiety and get you on the path toward a better financial future.

First, ask yourself whether debt has become a problem for you. Here are some circumstances that might indicate it has:

• Next month’s bills arrive before last month’s have been paid
• Your bills often include late fees
• You avoid opening bills when they arrive in the mail

Write it down

Do you actually know how much debt you have? Many people don’t. Start by making a list of everything you owe, whether it’s a mortgage, a credit card balance, student loans or even money you borrowed from family or friends. Write down:

• The lender’s name
• The amount you owe
• The term of the loan
• The interest rate and fees

Then add them up. Looking at the numbers can be worrying, but this is a positive – and necessary – first step to tackling your debt.

The power of 50

Paying the minimum amount due on your credit cards is one of the fastest ways to fall further into debt, and it can keep you in debt for years or decades. If you have a credit card with a $3,000 balance at an annual interest rate of 18%, and you pay only the 2% minimum monthly payment of $60 per month, it would take you eight years to pay off your bill. Not only that, you will have paid $5,780 by the end of the eight years – almost double the $3,000 you thought you were spending when you made the charges.

Paying just $50 above the minimum amount due each month will make an incredible difference in how quickly you can pay off what you owe. If you pay an additional $50 per month toward your $3,000 balance for a total payment of $110 a month, you could pay off the debt in three years instead of eight, and save yourself more than $1,800 in interest. Imagine what you could do with $100 more per month.

But if you can pay an additional $50 per month on that debt, for a total payment of $110 a month, you will pay down more of the $3,000 you originally owed. And that means less interest. As a result, you would pay off the debt in three years and save more than $1,800 in interest payments.

Be realistic

Now you have analysed your debt situation, it’s time to look at your monthly budget and set realistic goals. That trip you had planned for next summer, or the new car you were hoping to buy, may not be on the cards right now given your new outlook on reducing your debt.

Don’t get discouraged

Reducing debt is like losing weight. You’re not going to lose 20 kilograms in a month – you need realistic goals in reasonable timeframes, and debt works the same way. It takes years for most people to become debt-free. This doesn’t mean you have to stop enjoying your life. It’s just a reminder to live within your means and be diligent about adjusting any spending habits that have contributed to the situation you are in today. Dedicating yourself to paying off what you owe and becoming debt-free will be worth the wait, with the payoff being a brighter financial future.