Debt Reduction vs. Savings
When your financial situation improves, you can then start to contribute to your savings and retirement accounts.
If you pay the minimum due on your credit card debts, it will take you months or years to pay off those debts and you will pay hundreds or thousands of dollars in interest. Other techniques you can use to get out debt are:
Negotiate with your creditors. Creditors don’t want you to stop making payments. If you explain to them that you can no longer afford to pay, they may be willing to lower your monthly payments and/or interest rate.
Increase your income: You may get a second or part-time job or start a side business. You may also try to gain work extra hours (overtime) at your job. If your spouse doesn’t work, it maybe a good idea for her/him to find a job.
Consolidate your debts: Debt consolidation is borrowing money at a lower interest rate to pay off higher interest debt to ultimately pay off your debt faster and to save money.
Getting help: There are many nonprofit credit counseling agencies that can help you to develop and maintain your budget. They may help you set up a debt management plan.
File for bankruptcy: This should be your absolute last option. However, bankruptcy maybe your best option if your monthly expense are extremely higher than your expenses that it will take decades living on a barebones budget to pay off your debt. You must consult with a bankruptcy attorney to determine if you should file for bankruptcy and which type you should file for (Chapter 13 reorganization which gives you 3-5 years to pay your debts or Chapter 7 liquation which eliminates most of your debts.