Most people have some kind of debt throughout their life. Having debt isn't necessarily a bad thing. It's how you manage your debt that's important. Because, having excellent credit means that you will typically get the best interest rate when you do borrow money. Creditors will see you as less of a risk and they will provide you with the most attractive loan terms, because they want your business.

Typically, there are three big debts in life: housing, transportation and education. You have debt when you choose to either buy a place to live or rent. Technically, either is a form of debt. Also, unless you are very disciplined and save a lot to pay cash for you car, you will probably have to borrow to buy your car. Many people can't even escape college without debt. That is why many students must seek debt consolidation for their student loans. These debts are realities for most people.

You also can have bills that are considered debt, like your electric bill. Financial planning purists would have you live with no debt. But, this is not realistic for most people. So a debt plan is needed (which sometimes debt consolidation).

Your goal is to live without unnecessary debts and debt consolidation can help with this. "Unnecessary debts" are things like credit cards, loans for new windows, furniture financing, etc. These are normally small debts that sounded good at the time you borrowed, but may have gotten out of hand when stacked on top of each other. Although, sometimes they're necessary purchases, like new tires, it's the way that they are managed by people that makes them burdensome. Debt consolidation will not reduce the burden, but it could, if managed effectively, make your debt more manageable.

So let's outline a procedure for taking back your life if debt has become or might become burdensome.

1. Get all of your bills together and list your monthly debts.

2. Sort the debts. You should physically put them into two piles: one for monthly bills you can't do anything about and one for other (these will end up being bills eligible for debt consolidation). For Example: Pile 1 includes: Home Mortgage, Gas Bill, Child Support, ... (these are not eligible for debt consolidation) and Pile 2: Credit Cards, Lines of Credit, small loans, ... (these are eligible for debt consolidation).

3. Next take out three pieces of paper and write "Absolutely Necessary" on the top of one piece of paper. List all the bills in Pile 1. But, before you add up the total, determine if there's any debt you've listed that you can immediately eliminate. For example, have you listed Cable TV or newspaper. You can you cut back on these and save money. Although they're small, they add up.

Once you come up with a list of debt that's absolutely necessary, add it up and circle the total. If this number is bigger than your take-home pay, Stop. You need to find a financial professional or certified credit counselor, immediately. You have reason to be scared, because currently you aren't making it.

4. Write "Manage" on the top of the other piece of paper. List Pile 2. This is the list you can work on (budget, payoff or debt consolidation). You may have moved the Cable TV or newspaper bills to this pile. Just to see where you are, add up this page. Circle the total.

5. On the Third piece of paper, write "Worksheet". This is where you are going to figure things out. This page will show you how to use budgeting, payoffs and debt consolidation to your best benefit.

6. On your worksheet, write "Where I Am:" then add pages one and two

Example: Where I Am: $1500 + $750 = $2250

7. Look at the number from Step 6. How does it compare to your paycheck? To find out, subtract Step 7 from your paycheck. Example: Paycheck - Payments = $2300 - $2250 = $50

8. If Step 7 is negative or very small, your problem is that you don't have enough money to live on with your current debt. Debt consolidation may help you, but you need to follow a strict budget that will result in the elimination all of your unnecessary debt.

9. If Step 8 is relatively large, then you have a spending problem. You will need to learn how to spend better so you can payoff your debt, otherwise you will never escape this problem. There are many budgeting systems and software existing to help you with this problem. Quicken works great for me and many others. Other software you can use includes Microsoft Money. There's also free downloads you can use to help you develop a family budget.

If you determine that you have a spending problem, then you can use debt consolidation, but without a good budget plan, you are likely to get in trouble again. Some people in your situation use debt consolidation and actually in end up with more debt! So my recommendation is to put off the debt consolidation until you have a budget.

10. If Step 7 is negative or very small, measures need to be taken to manage your debt. Take a good look at your list. We discussed Cable TV above. Look at any subscriptions that you could cut back on or eliminate? Do you need your gym membership? Can you cancel a cell phone? Are you paying someone to cut your grass? Some of these things you may need, while others you can completely eliminate.

11. Next, look at your debts. Do you have a bunch of little loans? If so, then develop a plan to pay the minimum on the others to pay them off. You probably can't do anything quickly about a $7000 balance, but a $400 balance could be paid of in just a few months.

12. Cancel all but your largest credit card. When you cancel a card, you won't have to pay the balance immediately, you simply won't be able to place any charges on it. This way if you have to put something on a card, only one balance will be growing.

13. Now that you have in effect "closed the barn door," what do your debts look like? Is there very little improvement? Has your budget opened up? If you are left with more than three large debts, you should look at a debt consolidation loan. This loan will reduce your payments to the minimum possible and maximize the size of your paycheck. I recommend that you use a mortgage calculator to figure out what interest rate and terms you need and what are available to further ease your spending.

14. Lastly, go thru Steps 1-7 again. In fact do this over and over. Think wash, rinse, dry. Does the picture change significantly each cycle? If yes, and you are now living comfortably, good. Stay the course. If no and you are not living more comfortably, talk to a certified credit counselor. You need more help than this article on debt consolidation loans can give you.

Debt consolidation should not be considered some magic pill that will make all your debts go away. Debt consolidation is really a tool you can use with other strategies to manage your financial life, not just your debt. Debt consolidation can reduce your stress, but could also make your situation worse, if not managed effectively. To make it work for you, you have to find a budget that you can live with.