Three Simple Steps: Managing Debt

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Being in debt can be one of the most overwhelming financial challenges you'll ever face. That's one reason that Americans have worked so hard to break themselves of their debt habit, with the Federal Reserve Bank of New York having reported recently that debt levels have fallen by $1.45 trillion since the third quarter of 2008. In particular, credit-card debt is down more than 20 percent over that time frame, reflecting the priority of getting high-interest-rate debt paid down fastest.

Even if you have a lot of debt, don't panic! You can get your outstanding loans under control if you take a long-term view and start taking baby steps toward better managing your debt. Start out with these three simple tips:

1. Order your credit report from, which is the free website set up under federal law to provide copies of credit reports to all Americans. You can get one free report every year from each of the three main credit-reporting agencies, and the report will tell you what loans and cards you have outstanding, how much you owe, and your payment history, including any late payments or delinquent accounts.

2. Gather up your loan and credit-card statements to match them up with your credit report. If you see extra entries on your credit report that aren't among the bills you're paying every month, flag those unknown accounts for future follow-up to avoid potentially nastier surprises further down the road.

3. Figure out the interest rates you're paying on each of your loans and cards. Usually, that information will be right on the loan statement, and doing so will give you a good idea of how to prioritize which debt to pay off first. Moreover, it'll give you ammunition in negotiating better interest rates down the road.

Debt can be a huge burden, but managing your debt doesn't have to be. Instead of freaking out or hoping that your credit-card balances will just magically go away, taking these simple first steps will get you on the road toward dealing with your debt once and for all.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.