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In the perfect world, there would be no debt. But most people must acquire some debt along the way. There are good debts and bad debts. Good debts are the debts that you can afford to pay. These are debts that give you more in return than you pay for them. For example, your reasonably priced home is an investment that can pay you more than you pay for it.

Bad debts are all those debts that you can't afford. The average American household carries around $9,300 in credit card debt. This debt is never a good debt. You usually use it to buy things that you can't afford otherwise. And yet, these things don't pay you back in the long run. You can usually pay for an item in a month or two of savings -- however, if you charge it, it may take you up to a year of payments.

In addition, all debt that you can't afford is bad. Stretching into a home at the risk of your finances is not a good financial decision. Taking on debt for an education you will never use is not a good idea either. Some people do use credit cards for large items that they pay off in a few payments. They are wisely managing their credit with very little in payment in interest. However, these people are very few. Most people have to face the fact that credit card debt gets out of control very easily.

The first thing you have to do is to manage your spending. If you don't spend, you don't owe. Most people spend thousands of dollars a year on little things that they don't realize they are buying.

Ever look in your wallet and try to recall where your money went so fast. You need to start by tracking your spending for a month. Write down everything you spend. Keep receipts for all purchases to make this process easier.

Sit down and see where your money is going and where you can cut back. If you can cut out $20 a week, you could have $980 less debt by the end of the year.

Many advisors will tell you to pay the smallest debts first. This costs you a lot of money in interest payments. You should always pay off the highest interest rate debts first. Make a list of your debts, from highest to lowest interest rates. Start at the top and work your way down.

You can definitely save your mortgage for the last thing you pay off. As this is a good debt, you can wait until the rest of your debts are paid off and you have an emergency savings account established. There is nothing greater than only owing on your mortgage. And when you pay it off, you can truly celebrate being out of debt.

The key to paying off your debt is to pay as much as possible. You shouldn't only make the monthly payment, it will take you forever to pay it off. And it will cost you much more than it should. Even an extra $10 a month on a $5,000 credit card balance at 18% interest can save you $4850 in interest and 262 months of payments. Amazing.

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